"This investment is of enormous importance for India and will help fuel our ambition to deepen our connection with buyers and sellers and to create the next wave of retail in India", said Binny Bansal. "We consider there was tremendous development potential for e commerce in India and important opportunity for numerous players to succeed from India's varied, domestic industry".
Its investment will include $2 billion of new equity funding and the company said it remains in talks with other potential investors to join the funding round, Walmart said. It also said that it will back Flipkart's goal of going public at some point as a majority-owned subsidiary corporation.
In a country where hyper-local mom-and-pop stores dominate, Walmart and Amazon are betting that groceries will emerge as a sweet spot. A year later, Kalyan Krishnamurthy was elevated to the position of CEO of Flipkart. Flipkart was already struggling to keep pace with the huge investments that Amazon was able to infuse into its India operations.
Sachin Bansal, who had co-founded Flipkart with Binny Bansal in 2007, would exit the company after the deal.
The blockbuster takeover, which is also Walmart's most expensive acquisition, threatens a major blow to rival Amazon's lofty ambitions in India.
Indians spend a mere $1 billion a year buying food online, Praxis Global Alliance estimates, but exponential growth is expected, if the recent recapitalisation of smaller companies like BigBasket and Grofers is anything to go by.
Walmart's business in India had previously been focused on small businesses. Finally, the deal was confirmed by Masayoshi Son of Japanese investor, Softbank, which holds a 23% stake in Flipkart. Sachin Bansal will sell his entire stake to Walmart while Binny Bansal will sell part of his to the American retailer, Economic Times reported Tuesday.
Walmart said Flipkart's logistics, payments and apparel businesses offer new areas of growth.
The companies said the board makeup was yet to be decided but that Flipkart and Walmart would remain distinct brands.
The retailer expects the transaction to hurt fiscal 2019 earnings per share by 25 cents to 30 cents if the deal goes through before the end of the second quarter. Walmart will retain a 42% stake in that combined company.
"The deal reaffirms that there is big opportunity in Indian retail", said Arvind Singhal, Managing Director of retail consultancy Technopak, adding it would attract more global investment into the sector.