Walmart makes a $16B bet on India's economy

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Walmart said it would pump $2 billion of new equity into Flipkart, giving the Indian e-tailer a bigger war chest to fight off a huge challenge from Amazon, which is rapidly expanding its reach. Flipkart co-founder Sachin Bansal made a decision to leave the startup he co-founded with Binny Bansal in 2007.

No doubt, this is India's largest-ever acquisition.

On most occasions, ministers and top officials would be more than willing to not just discuss the deal but also pose for photographs with a Walmart CEO.

Walmart has finally acquired major stakes in Flipkart in what is being hailed as the world's biggest e-commerce deal, valued around $18-20bn.

Flipkart's co-founder Sachin Bansal will make a complete exit from the company, while Binny Bansal will continue to work as Group CEO.

S&P lowered Walmart's outlook to negative from stable, citing increasing leverage and risks stemming from the company's spending to expand online and globally as it continues its share buyback program. It seemingly slowed down slightly from some furious deal-making in 2015, when it invested $1 billion across more than 50 companies and a year later reported negative returns.

eBay has said it intends to sell its holdings in Flipkart and end a strategic relationship.

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Through this deal, Walmart aims to transform Flipkart into a publicly-listed and majority-owned subsidiary in the future.

The deal is subject to clearance from Competition Commission of India and other regulators. The company's stock was already down 13% this year through Tuesday's close. "SJM, RSS and BJP have a consensus that FDI in multibrand retail will not only kill entrepreneurship, it is antifarmer and will kill job creation opportunities in the market". "This investment aligns with our strategy, and our goal is to contribute to India's success story as we grow our business".

In 2015, a unit of conglomerate China Resources Corp plans to sell minority stakes it holds in 21 Wal-Mart Stores Inc WMT.N. outlets around China for $525 millihere. It could potentially use those Best Price stores as pickup and delivery points.

For the US retailer, acquiring a stake in Flipkart enables it to tap into India's retail market without building stores. E-commerce sales in India hit $21 billion previous year according to market research company Forrester, and are expected to soar as its population of 1.25 billion people make greater use of internet access. And that's exactly why analysts believe Walmart's investors are beginning to write off the Flipkart investment.

The move marks the Arkansas-based retailer's effort toward retail dominion outside of the country as it seeks to contend with rival Amazon, which had also reportedly been in talks to acquire Flipkart.

Such is the force & magnitude of this mega-deal worth $16 billion (Rs 1.04 lakh crore), that it changes everything for Indian e-commerce and digital sector.

It also owns eBay's India business as well as popular mobile payments app, PhonePe.

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