Walmart buys 77 percent stake in Flipkart for Dollars 16 billion

039;Flipkart founders may be liable for 20% capital gains tax after stake sale to Walmart'

For now, India will become the new battleground for Walmart and the Jeff Bezos-run Amazon.

Shares of world's biggest retailer Walmart fell more than 4 per cent on Wednesday, wiping off almost $10 billion from its market value after the announcement of its biggest ever deal in which it will pay $16-billion to buy 77 per cent stake in India's largest etailer Flipkart. But Walmart believes India, which has 1.3 billion people, could be among the world's top five e-commerce markets within the next five years.

If Walmart continues the same model and Flipkart complies with all conditions after acquisition there would no violation of FDI violation and the deal would not require any approval.

In terms of numbers, Walmart is paying $16 billion to lay a claim to 77% of Flipkart's shares.

The deal, which wiped away $10 billion of Walmart's market capitalisation as investors reacted negatively in early morning trade on the New York Stock Exchange, stands out for several exits.

Analysts said the deal helps Walmart gain a foothold in Indian retail without having to open commercial stores which is problematic under Indian foreign direct investment rules.

Walmart has also opted to use Tencent's mobile payment system, WeChat; in the process dropping the Alibaba-linked Alipay in all its stores in the western region of China and giving WeChat a significant boost in the battle for China's almost $13 trillion mobile payment market.

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USA officials traveled to Beijing last week for talks on resolving the dispute between the world's two biggest economies. Its imports from the U.S. rose 20.3 percent, the fastest growth in three months.

An official statement by Walmart said that the investment will help accelerate Flipkart's customer-focused mission to transform commerce in India through technology, and underscores Walmart's commitment to sustained job creation and investment in India.

"If there's one thing we can learn from the recent Flipkart saga, it's this: never count out Walmart". Walmart will offer a 100% buyback of vested shares by Flipkart employees, ET Now reported, citing sources.

Overall, if we combine these three factors, then this acquisition of Flipkart by Walmart is a gamechanger for the entire industry, and all stakeholders - entrepreneurs, ecosystem and the customers. It now operates 21 such stores in India.

Do you think Walmart did a smart thing by spending $16 billion to acquire Flipkart, compared to building their own portal? It ships eight million orders per month and operates 21 warehouses.

Flipkart co-founder Binny Bansal, Tencent Holdings Ltd of China, Tiger Global Management LLC and Microsoft Corp will hold the remaining 23 per cent.

"India is one of the most attractive retail markets in the world given its size and growth rate, and our investment is an opportunity to partner with the company that is leading transformation of ecommerce in the market", said Doug McMillon, Walmart's president and CEO in the release. Amazon has been selling grocery in India for the past one year, while Flipkart has not rolled out this category.

In India, Naspers still retains OLX, an online classifieds business, PayU, a payment and fintech services provider, and its investments in Swiggy, an online food delivery company, and MakeMyTrip, an online travel business.

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