Walmart's Huge Bet on India Involves Short-Term Pain

Pays $16B for stake in Flipkart
By Newser Editors and Wire Services
Posted May 9, 2018 10:33 AM CDT
Walmart Makes Its Biggest Acquisition Ever—in India
A bird flies over the Flipkart headquarters in Bangalore, India, Wednesday, May 9, 2018. Walmart is paying $16 billion for a controlling stake in India's giant online retailer Flipkart, breaking into a fast-growing economy where it has struggled to establish a foothold.   (AP Photo/Aijaz Rahi)

Walmart is breaking into India's massive and growing consumer market with its biggest acquisition yet, spending $16 billion for a controlling stake in the online retailer Flipkart, whose delivery drivers, with their motorcycles and oversized backpacks, have become ubiquitous across the nation of 1.3 billion people. Flipkart's supply chain arm, eKart, is established in more than 800 cities and makes 500,000 deliveries daily. The acquisition surpasses Walmart's $10.8 billion deal to buy United Kingdom's Asda back in 1999 and makes its acquisition two years ago of online retailer for $3 billion look paltry. It also reflects Walmart's focus on growth opportunities as it tries to narrow the gap between itself and Walmart is building fewer big stores and expanding its presence online.

Online sales in India have exploded in recent years, reaching $19.6 billion in 2017, according to a Forrester report. Those sales are expected to grow rapidly this year. Both Walmart and Amazon have pushed hard to catch up to Flipkart, which was founded in 2007 by two former Amazon employees, and to become the first major US retailer to establish a substantial foothold in the country. Walmart will own approximately 77% of Flipkart but will absorb some short-term pain in India. It said Wednesday that it expects earnings for the current fiscal year to be depressed by 25 to 30 cents. "As Flipkart is expected to generate meaningful losses for at least the next few years, this is clearly an investment for the future," Charlie O'Shea, Moody's lead retail analyst, tells the AP.

(Read more Walmart stories.)

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