Walmart Inc will pay $16 billion for control of India’s Flipkart, shares slide

The logo of Flipkart is seen on the company's office in Bengaluru, India, May 9, 2018. REUTERS/Abhishek N. Chinnappa

Vastavam web: Walmart Inc (WMT.N) said on Wednesday it will pay $16 billion for a roughly 77 percent stake in Indian e-commerce firm Flipkart, the U.S. retailer’s largest-ever deal as it competes with Amazon.com Inc (AMZN.O) in an important growth market.Shares of Walmart fell 3 percent. The company warned it expects the deal to reduce fiscal 2019 earnings by 25-30 cents per share if it closes in the second quarter. It also expects Indian investments to shave 60 cents per share from earnings in fiscal 2020.

The deal probably will not do much to change market share between Flipkart and Amazon in India, said Jason Benowitz, senior portfolio manager at the Roosevelt Investment Group. In the fiscal year ended March 31, Flipkart reported sales of $4.6 billion.Flipkart sells consumer goods ranging from soaps to smartphones and clothes, and gives Walmart access to an e-commerce market that could be worth $200 billion a year within a decade, according to Morgan Stanley.Walmart said Flipkart’s logistics, payments and apparel businesses offer new areas of growth.

“It is not so much about succeeding in India for Walmart because that may or may not happen,” said Neil Stern, senior partner at retail consultancy McMillan Doolittle. “It is really about grabbing an opportunity after waiting on the sidelines in a growth market for over a decade,” he said.Walmart entered the Indian market in 2007 through a joint venture with a local company, years before Amazon debuted there. That joint venture was called off in 2013 and its presence in India has remained largely static, at least partly due to restrictions around foreign investment in physical retail.