Walmart is close to a $12 billion deal for Flipkart

Walmart Inc. is very close to finalizing a deal to buy a major stake in India’s largest e-commerce company for at least $12 billion. This deal may be closed in the next two weeks, according to sources. Majority investors in Flipkart Online Services Pvt are on board with the Walmart purchase after a debate over the Amazon.com Inc. acquisition. Walmart will end up with 60 to 80 percent of the share in Flipkart which is valued at about $20 billion. Tiger Global Management will sell its 20 percent stake in Flipkart while SoftBank Group Corp will offload a significant part of its 20 percent plus holding.

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It is yet not resolved whether the Flipkart’s founders will lead the business after the purchase and how much every investor sells and what Walmart’s final stakes will be. It could be possible that the terms change or the talks fall apart. If the deal is completed, it will give Walmart a substantial foothold in the market of 1.3 billion people. Walmart is world’s largest retailer but has struggled against Amazon as consumers migrate to online commerce. India is a huge prize for China and the US, where foreign retailers have made little progress against Alibaba Group Holding Ltd. There is no other country with this huge opportunity. Every e-commerce giant is eyeing the Indian market.

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Flipkart’s board has been considering Amazon and Walmart as potential partners but ultimately decided Walmart could close a deal easily. Since Walmart has no online retail presence in the country, it is likely to face fewer regulatory hurdles while Amazon is Flipkart’s primary rival. Flipkart founders are also said to have favored Walmart. Amazon has already been expanding in the country aggressively. The founder, Jeff Bezos committed $5.5 billion to the country and the company has made progress by adapting the site to local conditions.

Amazon has been gaining the ground quickly on Flipkart and has tried to derail the Walmart transaction atleast in part since it will fortify the Indian rival. Walmart can help Flipkart with decades of retail experience from marketing to logistics. However, Amazon has already got a good hold in the Indian Market and is ready for the battle ahead. They will pump more into investments in fashion and food category. The $20 billion price tag will be higher than Flipkart’s valuation of $12 billion last year. It is one of the most valuable startups in India. SoftBank will also make a good profit in the deal, the company invested $2.5 billion at the earlier valuation and this stake could be worth more than $4 billion at the Walmart deal’s valuation.

Flipkart’s largest shareholders are Tiger Global and SoftBank followed by South Africa’s Naspers Ltd. If this deal gets through, it will be the biggest in the history of India’s e-commerce.