Why Walmart needs Flipkart in its e-tail race in India

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Walmart Signs a New Deal with the Indian Flipkart Online Services

Previous Reuters report indicated the USA grocery store chain was in advanced talks to acquire 51% or more of the e-commerce player for $10 billion to $12 billion (estimated Rs 67,200 crores to Rs 80,700 crores), valuing Flipkart at some $18 billion to $20 billion (estimated Rs 1.21 lakh crores to Rs 1.34 lakh crores). The Confederation of All India Traders, an umbrella association representing millions of traders, has demanded government scrutiny of the Walmart-Flipkart deal, which it says will only encourage predatory pricing. Additionally, Walmart does business in China with JD.com, which is closely allied with Tencent, an investor in Flipkart. The strategic shift forced Walmart to play catch-up in the world's biggest e-commerce market, and Chief Executive Officer Doug McMillon doesn't want to miss the opportunity before him in the world's second most-populous nation.

According to India Brand Equity Foundation, a government-supported research agency, the Indian e-commerce market is expected to reach $64 billion by 2020 and $200 billion by 2026 from $38.5 billion as of 2017. "Accordingly, if SoftBank would have invested in Flipkart Singapore through these countries, they could be liable to pay capital gains tax in India in respect of investments made after March 31, 2017", said Chirag Nangia, Director, Nangia & Co LLP. It is a move that would likely bring the ongoing turf war between Amazon and Walmart into the sub-continent and is expected to cost the USA retailer around $20bn. It hits $20 billion valuations this year which is greater than $12 billion in the previous year. As such, as the deal comes closer to the final stages, it is becoming evident that the proposed plan post the deal is to have Binny Bansal stay on as the group CEO and as the new executive chairman of Flipkart.

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Krishnamurthy and Binny Bansal will remain in their current roles after the deal, the two sources said, a report said.

With all these developments going on the Filpkart investors SoftBank and Naspers are expected to completely exit Flipkart.

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During a recent investor call, Amazon CFO Brian Olsavsky had said the company would continue to invest in India as it sees "great progress" with both sellers and customers here, even though as the U.S. e-tailing giant had registered a loss of Dollars 622 million from global operations in the first quarter of 2018. But this was inevitable, and probably the only way Flipkart would have stood up to competition from Amazon. But apart from one co-founder's exit, nothing much is expected to change at the top management. Walmart will look to own a roughly 60 percent stake, while Alphabet will get about 15 percent ownership of the online marketplace, sources added.

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