Walmart, Flipkart agree on purchase

U.S. retailer sellsIndian operations

Walmart Inc. has sold its operations in India to its e-commerce subsidiary Flipkart Group for an undisclosed amount, Walmart said in a news release Thursday.

The deal includes Walmart India's 28 Best Price Modern Wholesale stores and e-commerce business as well as its 5,200 employees, the Bentonville retailer said.

Flipkart Group will use the companies' combined resources in the debut next month of a digital marketplace called Flipkart Wholesale. The new venture aims to support India's 12 million or so neighborhood mom-and-pop stores, called kiranas, with broader access to technology and product selection. These services also will extend to India's micro-, small- and medium-size businesses.

Flipkart Wholesale will be headed by Flipkart Group veteran Adarsh Menon. Walmart India chief executive Sameer Aggarwal will stay with the company during the transition and then move to another role within Walmart, the retailer said.

Walmart paid $16 billion in 2018 for a 77% stake in Flipkart. That transaction remains Walmart's largest in its history.

Earlier this month, Walmart led a $1.2 billion financing round into the Bengaluru company, saying the funding would help the homegrown company expand its reach and fend off competition in India's vast and growing market.

The investment, made with a small group of current shareholders, raised Flipkart's value to $24.9 billion. "As the e-commerce pioneer in India, the Flipkart Group has transformed the shopping experience for millions of Indian consumers," said Kalyan Krishnamurthy, Flipkart's chief executive officer. "With the launch of Flipkart Wholesale, we will now extend our capabilities across technology, logistics and finance to small businesses across the country."

Judith McKenna, Walmart International's president and chief executive, said the company has been committed for more than a decade to boosting India's prosperity "by serving kiranas and [other businesses], supporting smallholder farmers and building global sourcing and technology hubs throughout the country." The newly combined team "will break new ground in their shared mission to help Indian businesses grow and succeed," she said.

Walmart opened its first store in India in 2009. Because India's regulatory laws prohibit foreign-owned companies from selling directly to customers, Walmart was limited to the wholesale business. It bought Flipkart, India's largest e-commerce platform, to gain entry to the country's burgeoning online business.

Organized retail is a small part of the Indian market and e-commerce makes up around 2% to 3% of that, Walmart said. Still, 60% of India's population, or about 840 million people, are projected to be using the internet by 2022, with e-commerce worth $200 billion a year by 2027, according to investment firm Morgan Stanley.

Walmart continues to face major competition in India from rivals Amazon and Reliance Retail, owner of app-enabled grocery delivery service JioMart. Sateesh Meena, senior forecast analyst with Forrester Research Inc.'s office in New Delhi, sees the move by Walmart and Flipkart as an effort to boost Flipkart's grocery business.

"This is in line with Flipkart's plan to go aggressive in grocery and use the customers and assets created by Walmart to prepare for the upcoming battle with Jio and Amazon," Meena told Indian news outlet The Economic Times.

Amazon has been selling in India since 2013. Mumbai-based Reliance Industries, which owns Reliance Retail, is a Fortune India 500 company and India's largest private-sector firm in terms of revenue and profit, according to Forbes.

Twitter users in India celebrated on learning of the Flipkart transaction through media reports. They said the new initiative will help farmers and small businesses that struggled even before the coronavirus pandemic lockdown devastated India's retail and supply-chain sector.

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