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Why did Flipkart acquire Walmart India

Flipkart: The major e-commerce company of India, acquired 100% stakes of Walmart India private limited. Earlier this year in July, Flipkart announced the acquisition of Walmart India and the launch of a new digital marketplace named Flipkart Wholesale to get a grip on the retail market in India. Flipkart thus displays a strong competition for other companies like Reliance Jio Mart, Amazon (B2B Segment), Metro cash and carry (Udaan). The effects of this pace turns out as Flipkart will be one of the strongest competitors in the B2B (business to business) segment. Also, there will be a great transformation of MSMEs (Micro small, and medium enterprises) and Kirana retail stores. Walmart is an American multinational physical retailer company. It operates 28 Stores including price, cash and carry stores, in India. [Physical retailer: Physical retailer includes hypermarkets, departmental stores, grocery stores. Cash and carry: in these stores, customers purchase products, pay money, and carry their belongings with them, whereas, best prices: These are the stores where retailers buy their products wholesale and then they sell their produce in their businesses that is shop or stores.] In 2018, Walmart India has acquired 77% stakes of Bengaluru headquartered Flipkart for $ 16 billion. After this, the company reported a loss of Rs.172 crore in fiscal year 2019. The accumulated losses for Walmart India until March 2019 was Rs.2,181 crore. So this consolidation only makes sense for Walmart India. Why did Flipkart acquire Walmart India? The retail market in India has a huge potential to expand in the upcoming years. According to a report, Indian retail can grow to $1.3 by a compound annual growth rate of 6%. According to a report, three out of four stores have no exposure to technology. The pandemic has also boosted up digitalization in the country. A huge number of retailers in the country are convinced to use technology to reboot and expand their businesses. There is a vast opportunity for exploiting the market. Walmart India CEO, Sameer Aggarwal said that the combination will help them to grow faster and bigger. Adarsh Menon, Senior Vice President and head of Flipkart Wholesale said that thousands of kiranas have already partnered with them to grow their businesses. Their main objective is to offer greater values and choices to the customers. The consolidation will bring the opportunity for growth and expansion of the business and will bring them prosperity. Walmart India has more than 1.5 million members. With the acquisition of Walmart India, it's employees and workers will join the Flipkart group. Walmart India shares a decent relationship with brands and is operating Best Price for more than twelve years. Flipkart will use the customers and assets created by Walmart to fight against its competitors. Analysts anticipate this acquisition as a good move for Flipkart to boost its ambitions in grocery retailing. Flipkart wholesale will stand as a great helping hand for MSME and Kirana retail stores will also be able to buy directly from an online platform. Products will be sold at affordable engine prices with effective and attractive offers for retailers. Flipkart wholesale will result in customer loyalty and customer retention.

Flipkart’s Credit offering for Growth Capital

Flipkart, India's largest e-commerce market announced the launch of a "growth capital" initiative to offer financial assistance of working capital loans within two days at the pricing of 9.5 % to the seller across the country. This initiative aims at creating a competitive platform for sellers to compare and access capital. The sellers need to go through a minimum documentation process for getting the loan. The average loan size will be ₹ 7 lakhs but sellers can avail of loans up to ₹ 3 crores at an interest of 9.5 % the duration on the term loan and credit line options are up to 12 months. To start this program Flipkart has tied up with leading banks and Financial Institutions like Bajaj Finserv, Leading Card, Axis Bank, Neo Growth, and Capital First with the vision to let every entrepreneur fulfill their business aspiration. This initiative tends to open a platform and ecosystem of financial services for sellers which will be governed by market forces with Flipkart playing the role of a curator. The reason for this initiative was stated that "the lack of funding has often emerged as one of the key hurdles for small businesses. Most of the leading organizations considered them as un-bankable which resulted in a lot of closers and borrowing from other sources." To ensure a speedy and hassle-free service it has also built an end-to-end API integration from application to this version with its leading partners to provide a complete digital loan application experience for selling they can access and monitor their loan directly through the company seller portal.

The role of digitization drive

Flipkart was started as an Indian startup based in Bengaluru in 2007. But in 2011, Flipkart Private Limited was set up and registered in Singapore. Thereafter, the primary office of Flipkart was shifted to the premises of foreign land. Eventually, the US-based Walmart acquired the maximum shares of Flipkart. However, Flipkart cordially shares its maximum subsidiaries in India. It has acquired a significant base of the audience in India. The Indian Government's approach of "Made in India" and "Digital India" has eventually engrossed a range of profits and sales through e-commerce companies. Additionally, the pandemic has surged millions of new customers from small towns and cities of India to switch to online platforms. The e-commerce company, Flipkart competes and rivals with Amazon, Jio Mart- a subsidiary of Reliance Industries. Walmart Incorporation has hired Goldman Sachs to explore the share sales of Flipkart and make it public by issuing IPO in the US. Flipkart became the first-ever Indian based company to have issued the IPO through outer premises of India. Walmart took 82.3% stakes in Flipkart. All shares of the Indian based company are in the hands of foreign companies (Singapore based Flipkart and US-based Walmart). It is no more an Indian company cause all the shares and profits are consumed by the US-based Walmart. The new internet revolution has made Walmart think of this initiative that would align their old customers and acquire new customers at the same time. Walmart is already a tough competitor to Amazon and other US-based e-commerce companies. After the acquisition of Jet.com in 2017, their sales displayed 44% growth. Eventually, after making a significant base in the US, Walmart took steps to make its footprint in India as well. The speculated online retail spend in India would grow from 3% (2017) to 10% (2025). The analysis is a big jump and major e-commerce companies are trying to set up a base in India, which is one of the most promising markets in the world. The digital revolution in India has attracted Walmart to pitch Flipkart, as they could not approach their rival Amazon. With the reverse acquisition of the B2B segment of Walmart India, Flipkart Wholesale will use its technology and supply chain infrastructure along with Walmart's expertise in the wholesale business to strengthen its position in the retail business. The amalgamation of the offline and online retail under one brolly would result in specific coordination that will aid both the companies in strengthening their weaker sections and broach the complete Indian market. Apart from the white goods, Flipkart lately stepped towards the sale of groceries, daily needs, etc, where Walmart has its expertise and will continue to aid them. Significantly, Walmart has eventually turned into a running e-commerce player in India through Flipkart. Walmart is best in opening offline stores, hence in the forthcoming future, it will aid Flipkart to achieve the objective sooner or later.

Finances of Flipkart and Walmart India

Consolidation is the new trendy norm of the Indian Retail Market. In July 2020, Flipkart acquired the wholesale business Operations of Walmart India, which is the world's biggest e-commerce deal. With Walmart India's cash and carry business Best Price, Flipkart can have its benefits in Retail selling. It already had a two hundred million online user base. It now gets the user base of outlets and after this huge acquisition, Flipkart is additionally expected to offer the credit options to B2B sellers. Walmart India's expenses packed up to 22 % from Rs 4,266 crore to Rs 5,225 crore for the year ending March 31, 2020. Walmart arrived in India in 2009 and broadened its existence to over 28 B2B wholesale stocks best rated under the currency and carry prototype. It is also essential to remark that Walmart India is no longer a particular commodity in India after its policies were obtained by Walmart assistant Flipkart in July 2020. Walmart India workers will join Flipkart Group and the home office squad will incorporate over the following year, while Walmart India CEO Sameer Aggarwal will shift to another position within Walmart. The organization ensured that the best rate group will proceed to assist its 1.5 Million consumers through its omnichannel system of stocks and e-commerce investments but it suffered a great loss within the financial year 2020 as compared to FY2019 which is inflated by 74% from the last financial year. The Company reported the data of net loss up to Rs.171.68 crore to 299.20 crore within the financial year 2019 to 2020 respectively. According to its FY20 financials accessed by business intelligence, Flipkart has acquired 100% interest in Walmart India Private Limited, which operates the Best Price cash. While on the other hand, Flipkart India is standing again with its constant disciplined performance. Flipkart's revenue raised to 12% in the financial year 2020, even being financially dropped by 18 %. On the e-commerce front, Flipkart has partnered with over 10 non-banking financial firms (NBFCs) to offer hassle-free credit to big digits of sellers underneath its initiative growth capital. Walmart India paid INR 4,451 crores in paying for property in exchange, which illustrated about 85% of the company's total expenditures. The previous year, the organization had paid 88 % of its expenditures on the same. Investment of property in exchange has always been one of the important sectors of expenditure for Walmart India as these are finished interests that support the organization in administering its company. Walmart India’s US parent, Walmart had reported a 5.6 % increase in its revenue to $137.7 billion from $130.4 billion for July 2021 financial year. However, its international business witnessed a fall of 6.8 % partly due to the Covid Pandemic in India. Walmart International had reported net sales of $27.2 billion for the May-July quarter down for $29.1 billion to the May-July quarter of Financial Year 2020. Flipkart has aforementioned that its monthly active customers figure streamed 45% in the financial year that led to March 2020, as compared to the previous year and these happy customers are making 30% more transactions now. The 13-year-old firm said it recently surpassed a data of 1.5 billion visits per month. According to a report by consultancy firm RedSeer, Indian retail is anticipated to grow to $1.3 trillion by 2025 at a 6 % Compound Annual Growth Rate (CAGR).

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