Walmart could be neglecting a key business by purchasing Flipkart

Flipkart Chart1

The investment will help accelerate Flipkart's mission to transform commerce in India through technology and underscores Walmart's commitment to sustained job creation and investment in India.

While the online auction and shopping website has had tremendous success in the USA, it has struggled to make a similar impact in India despite launching in 2005, two years before the launch of Flipkart and five years ahead of Amazon launch in the country.

The US bricks and mortar retail giant bested its US counterpart Amazon after the ecommerce firm reportedly made a competing offer to acquire Flipkart that ultimately failed.

While Tencent and Tiger Global will continue on the Flipkart board, there will be newer members of Walmart who will join as part of the acquisition.

And Walmart has just provided a genuine multi-billion dollar exit to many of those investors, strengthening the case for even more investments in India's online commerce startup scene.

Mr. Khandelwal has demanded that Government should immediately frame a national policy for e commerce and constitute a Regulatory Authority to regulate and e commerce business in India and till such time, the deal should be put in abeyance by the Government and a close scrutiny should be held in the entire deal. The traders' body said that it was an attempt to control and dominate retail trade in India in the long run, while the Swadeshi Jagran Manch accused Walmart of circumventing rules and entering India's retail sector through the back door.

Flipkart, founded in 2007, sold $4.6 billion worth of goods in the fiscal year ending in March, more than a 50 percent increase from the previous year.

"Last night, (they) reached a final agreement and it was decided that Flipkart will be sold to America's Walmart", said Son, whose firm happens to be the largest investor in Flipkart, owning about 20% in the homegrown company.

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"It's capital intensive business that needs deep pockets which Walmart has", she tweeted.

Flipkart co-founder Binny Bansal recently announced 100 percent buyback of vested employee stock options (ESOPs) with reports suggesting that it could be around $150 (Rs 10,000) a share, Times of India reported.

With the Flipkart - Walmart acquisition, the global fight between Walmart and Amazon will come to India.

With Walmart having 73% stake of Flipkart, it gives a tough competition to Amazon.

"We are actively working to shape the portfolio of geographies and businesses we're in, in order to set the company up for success for another generation", Walmart CEO Doug McMillon said in a conference call Wednesday.

While Walmart and Flipkart will leverage the combined strengths of both companies, they will maintain distinct brands and operating structures.

"It is to be noted that nowhere in the world, Walmart has a market place model", he said in his letter.

At present, the retailer operates in 9 states and 19 cities and the future expansion is focused on more or less the same geographies.

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