Walmart buys 77% stake in Flipkart for $16 billion

New Delhi: Walmart Inc on Wednesday said it is buying 77 per cent stake in Flipkart for about USD 16 billion (Rs 1.05 lakh crore), it's biggest deal which will give the US retailer access to Indian e-commerce market that is estimated to grow to USD 200 billion within a decade.

The deal, wherein co-founder Sachin Bansal and Japan's Softbank Corp Group are exiting, values Flipkart at USD 20.8 billion. It is the most significant M&A deal in India this year.

"Walmart's investment includes USD 2 billion of new equity funding, which will help Flipkart accelerate growth in the future," a Walmart statement said.

They "are also in discussions with additional potential investors who may join the round, which could result in Walmart's investment stake moving lower after the transaction is complete", the statement added.

"Even so, the company would retain clear majority ownership," Walmart said.

Google parent Alphabet Inc seen to be the potential investor who may get as much as 15 percent.

Binny Bansal, who had co-founded Flipkart with Sachin 11 years ago, will retain his 5.5 percent stake and will be Chairman of the company's Board.

Walmart's Krish Iyer will be the CEO of the company which will continue to be based out of Bengaluru.

Walmart and Flipkart will remain separate brands, and the Indian e-commerce company will have an independent Board, which will be revamped to give representation to the US firm.

Tencent Holdings Ltd, Tiger Global Management LLC and Microsoft Corp will also continue to remain shareholders in Flipkart, Walmart said without divulging their stake.

"While the immediate focus will be on serving customers and growing the business, Walmart supports Flipkart's ambition to transition into a publicly-listed, majority-owned subsidiary in the future," it said.

Pre-deal, Tiger Global Management held about 20 percent stake in Flipkart.

The deal is subject to clearance from Competition Commission of India and other regulators. It is expected to close later this year.

The deal will help the US retail giant -- which has seen consumers migrate to online platforms like those run by Amazon — get a vantage position in e-commerce space in the world's fastest-growing economy which has a vast untapped but rapidly growing market.

Only 14 percent of its over 400 million Internet users shop online and the number is projected to rise to over 50 percent by 2026.

The deal would bring over 175 million users to Walmart, which has been eyeing the Indian market for a few years. So far it had been handicapped by India's retail policy that does not allow overseas companies to sell directly to consumers (except in wholesale cash-and-carry segment).