Walmart agrees to buy 77 percent of Flipkart

Walmart agrees to buy 77 percent of Flipkart

Walmart agrees to buy 77 percent of Flipkart

Walmart shares slumped more than 4 per cent in the morning trade today wiping off almost United States dollars 10 billion from its market capitalisation, hours after the retail giant announced USD 16 billion worth Flipkart deal.

The deal, announced in a joint statement, values Flipkart, India's largest e-tailer by sales, at just over $20 billion.

"This investment is of huge importance for India and will help fuel our ambition to deepen our connection with buyers and sellers and to create the next wave of retail in India", said Binny Bansal.

Sachin Bansal (right), a co-founder of Flipkart, will leave the company.

Watch Walmart trade in real time here.

Walmart's investment includes $2 billion of new equity funding, first reported by BusinessLine on April 25.

"As a company, we are transforming globally to meet and exceed the needs of customers and we look forward to working with Flipkart to grow in this critical market".

For Walmart, the acquisition opens a new front in its battle with Amazon, which had expressed interest in making a competing offer for a stake.

Financials filed with the Registrar of Companies, however reveal that while the losses rose in the period between December, 2009 (Rs 151 crore) to December, 2013 (Rs 532 crore), the company managed to reduce its losses in the following two years. Flipkart, which now controls almost 40 percent of India's online retail market, is seeking to enter grocery, CNBC has reported.

Both sources said that Flipkart Group Chief Executive Binny Bansal held a closed-door meeting with the firm's top leadership at its Bengaluru headquarters on Monday, and one added that Bansal said that Flipkart co-founder Sachin Bansal would exit after the Walmart deal is sealed.

The Bentonville, Ark. retailer warned the deal - its largest overseas acquisition ever - will dent its earnings in the current fiscal year by 25 to 30 cents a share if it closes by the end of the second quarter. The partnership will give Walmart a 77 percent stake in a rapidly growing market which is now comprised of 1.3 billion people. Tencent is also an investor in Flipkart; it had invested in the Indian company past year and hasn't exited yet.

However, Flipkart's board reportedly believed regulatory hurdles could ensue in an Amazon-Flipkart deal since Amazon is India's No. 2 online retailer and Flipkart's primary competitor.

Walmart is down 16.63% on the year. The transaction's closure is expected to occur later this calendar year.

The purchase is about "setting the company up for growth and profits in the future", CEO Doug McMillon tells investors.

Other investors like Naspers and eBay said they sold their holdings in Flipkart.

After a decade of struggling to navigate tough foreign ownership rules, the $250-billion company only has 21 wholesale cash-and-carry stores in India. Son said his firm's investment in the Indian online retailer had grown to $4 billion.

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