Walmart Inc will pay US$16 billion for a roughly 77 per cent stake in Indian e-commerce firm Flipkart, the United States retailer's largest-ever deal, in an attempt to compete with rival Amazon.com Inc in a key growth market.
The deal will help the USA retail giant - which has seen consumers migrate to online platforms like those run by Amazon - get a vantage position in e-commerce space in the world's fastest growing economy which has a huge untapped but rapidly growing market.
Walmart chief executive Doug McMillon said the purchase is about "setting the company up for growth and profits in the future". Walmart is infamous for wiping out smaller businesses through their highly competitive pricing.
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There's no doubt that the news about Walmart spreading its reach in India has rung the bells at Amazon, Walmart's enemy from the same motherland. The retail giant could launch their in-house brands on the e-commerce platform.
Walmart's investment in Flipkart includes $2bn of fresh equity funding.
After months and months of rumors, USA retail giant Walmart and Indian e-commerce major Flipkart have officially announced their partnership.
Amazon has long considered India one of its most important overseas markets.
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The company said in a statement that it will also re-launch its Indian operations in a new avatar that will iniitally focus on cross-border trade. Son said that with the Walmart deal, that investment is now worth $4 billion.
Flipkart will be getting additional capital and expertise to battle Amazon, which has spent billions of dollars to gain customers in India.
In India, Naspers still retains OLX, an online classifieds business, PayU, a payment and fintech services provider, and its investments in Swiggy, an online food delivery company, and MakeMyTrip, an online travel business.
The Bentonville, Ark. retailer warned the deal - its largest overseas acquisition ever - will dent its earnings in the current fiscal year by 25 to 30 cents a share if it closes by the end of the second quarter.
The law on the tax treatment on indirect transfer of assets is clear: the value of shares of a foreign company is deemed to be substantially derived from India if the value of the Indian assets is more than 50% of its worldwide assets.
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