India's original E-Commerce Poster Boy sells out to Wal-Mart: Angel Broking

Views of Angel Broking:

"Flipkart, India's original e-commerce poster boy, has sealed the deal to sell out to global retailing giant, Wal Mart. News about the likely deal had been doing the rounds of VC circles for several months now. Finally, the deal was confirmed by Masayoshi Son of Japanese investor, Softbank, which holds a 23% stake in Flipkart. Softbank and Naspers will be selling their entire stake in Flipkart to Wal Mart while other investors like Tiger Global, Accel Partners and Tencent will retain a small part of their stake.

While the final nuances of the deal by Flipkart and Wal Mart are still awaited, Wal Mart is paying $16 billion for a 77% stake in Flipkart. That gives Flipkart an enterprise valuation of close to $21 billion. This will rank as one of the world's biggest e-commerce acquisition and will now pit Wal-Mart directly against Amazon in their quest to penetrate the Indian e-commerce market. Among the two co-founders of Flipkart, Binny Bansal will stay on as the Co-CEO of the new entity while Sachin Bansal will sell his 5.5% stake in Flipkart to Wal Mart at an approximate value of $1.15 billion.

The deal will mark a new beginning in the e-commerce industry in India which will now be dominated by Amazon and Wal-Mart. Flipkart was already struggling to keep pace with the huge investments that Amazon was able to infuse into its India operations. Now the financial muscle of Wal Mart will be pitted against the deep pockets of Amazon and both are expected to invest heavily in back-end infrastructure and front end logistics.

Of course, the question still remains as to whether the idea of Indian entrepreneurs selling out to global giants is an encouraging signal for Indian Industry or not?"

Source : Equity Bulls

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