Clearing the way for global retail giant Walmart to enter India’s e-commerce market, the Competition Commission of India (CCI) has approved its $16 billion deal to buy a 77 per cent stake in Flipkart.
“CCI India approves the proposed acquisition of Flipkart Private Limited by Wal-Mart International Holdings, Inc,” the regulator broke the news on Twitter. The competition monitor took almost three months to give the final approval to the deal, which witnessed protests from trade bodies, retailer associations as well as political organisations.
The CCI has investigated the deal for three months. That included studying the concerns of organisations such as Confederation of All India Traders and Swadeshi Jagran Manch, among others.
“We welcome the CCI’s decision. Walmart remains committed to contributing to the Indian economy by supporting smallholder farmers, manufacturers, and our Kirana customers. Our partnership with Flipkart is testament to our continued confidence in our ability to contribute to this market. Flipkart is a prominent player in India with a strong, entrepreneurial leadership team that is a good cultural fit with Walmart. We believe that the combination of Walmart’s global expertise and Flipkart will position us for long-term success and enable us to contribute to the economic growth,” Walmart said.
Cash registers to ring soon for investors
With this clearance, Flipkart’s main investors and one of the founders, Sachin Bansal, are set to make anywhere between $100 million and $2.5 billion. Bansal, who exited the company when the deal was struck, would earn a little over $1 billion for his 5.5 per cent stake in the firm.
Earlier this week, Japanese investment giant SoftBank, which had agreed to sell its entire 19.95 per cent holding in Flipkart to Walmart, reported a gain of around $1.48 billion in its operating profit on account of increase in the fair value of its stake in the company. The firm set aside around $648 million in taxes to be paid as short-term capital gains to the Indian government once the deal was completed. Its other major investors include Tiger Global, Naspers, Accel and Tencent, among others.
Walmart readies to roll out India retail plans
Over the next few months, Walmart would be sending its army of executives to India to understand the Indian market as well as how e-commerce functions in the country.
It would also be bringing in a host of new products and private labels to expand Flipkart’s online marketplace capabilities. “Walmart will finally be able to understand how to run a business in a mass market like India and would take these learnings abroad. It would be able to tap into 54 million active user base in the country,” said a senior executive from a firm that helped Walmart bag the Flipkart deal.
In an investor call after the deal announcement, Walmart president and CEO Doug McMillon had said Flipkart would help the American major learn about the ecosystem. “We want to get the learnings from Flipkart and take it to other parts of the world.”
Source: Business-Standard