Walmart to open 50 new stores in India in 4 years

Not an easy path

Regarding the deal, Biyani had told a news agency that nothing will change in Flipkart except its ownership.

Although Biyani has indicated that he may bring on board a "strategic investor" for his business, the veteran feels his group has a well-diversified business to take on global giants.

Shedding more light on the finances of the deal, Walmart in its statement has said that its investment of about $16 billion, which includes $2 billion of new equity funding, will help Flipkart achieve its growth potential.

In his letter sent to Prabhu earlier, Mahajan expressed fear that after Walmart's entry into Indian retail space, inflows of Chinese goods could further increase, as the U.S. retail behemoth is the seventh largest importer of Chinese merchandise in the world, inflating country's trade deficit. Now in government, the BJP is facilitating the entry of foreign capital through the e-commerce route.

The government of India has been loathe to allow big global groups to start super market chains in India, fearing that do so will drive customers away from small, mom-and-pop shops. Walmart has not been able to make a mark in the Indian market the past 11 years since it tried to enter through a "cash and carry" wholesale business, due to absurdly rigid government regulations. "Soft-Bank's fund is registered in Jersey [USA] and they are suffering a huge tax liability because there is no DTAA protection with Jersey", said the source.

Despite this, super markets and hyper markets continue to be prohibited territory to global companies.

The deal has been in the works off and on for two years, with both Walmart and Amazon vying to buy Flipkart. So India's retail market is about the same as Walmart's annual turnover.

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For Walmart, hitching its wagon to Flipkart probably represented its best shot at winning in India. "We now have 21 stores and plan to open 50 stores in five years".

By paying $16 billion, Walmart is valuing Flipkart at 4.5 times its sales.

F Flipkart was founded in 2007 by the former Amazon executive Sachin Bansal along with its IITian batch mate Binny Bansal. A transition to a listing for Flipkart implies an eventual path to profitability, which will require lower discounting, says IDFC Securities.

Ever since rumours about the deal got stronger, seller associations expressed their reservations towards the deal, fearing that it will lead to an uneven level playing field, causing domestic players to lose out.

This negative impact will include "the incremental interest expense related to the investment", the Bentonville, Arkansas-based Walmart said in a filing with the Securities and Exchange Commission of the U.S. on Wednesday. Technically speaking, Flipkart India's shares haven't been sold at all but, Flipkart Singapore, the report added.

The primary encumbrance in selling grocery through the online channel is poor logistics. It is now going to be interesting, how Amazon will tackle the combined capabilities of Walmart and Flipkart. We expect the competition getting aggressive as Amazon counter-offered Walmart for a stake in Flipkart. Walmart is way behind Amazon in the online retail market share though it is the biggest in offline retail.

"This upcoming battle, it turn, puts a big question market to the future of companies, such as BigBasket".

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