Walmart Takes Control of India's Flipkart in E-Commerce Gamble

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Walmart said its investment included $2bn of new equity funding, which will be used partly to fund an expansion into online grocery sales, according to a person close to the deal.

Walmart has been attempting to enter the Indian retail market for more than 15 years but the government's regulation of not allowing Foreign Direct Investment (FDI) into multi-brand retail proved as a hindrance for the United States retail giant.

The deal all but assures an ongoing global rivalry between Walmart and Amazon. "So, I wanted to write to you personally to celebrate the news, fill you in on what this investment means, and whether there are going to be any changes in your relationship with Flipkart", he added.

Walmart shares ended the US Wednesday trading session 3.13% lower at $83.06.

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The remainder continues to be held by will be held by some of Flipkart's existing shareholders, including Flipkart co-founder Binny Bansal, Tencent Holdings Limited, Tiger Global Management LLC and Microsoft Corp. The deal will shave 25 cents to 30 cents per share from this year's earnings, with that impact doubling the following year. Flipkart will maintain a separate brand and operating structure, the companies said.

Reacting to the deal, RSS affiliate Swadeshi Jagran Manch has alleged that Walmart was "circumventing" rules for a "back-door entry" into India, and sought Prime Minister Narendra Modis intervention to safeguard "national interest".

Launched in 2007 and envisioned as the Amazon of India before the latter came to India, Flipkart owns countrys largest online fashion retailers - Myntra and Jabong - both of which it had acquired. This investment definitely opens new doors for the company in India.

The deal represents a missed opportunity for Amazon CEO Jeff Bezos, who has also failed to create a meaningful presence in China. He was joined by Doug McMillon, chief executive officer of Walmart Inc and Kalyan Krishnamurthy, the CEO of Flipkart.

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"While eCommerce is still a relatively small part of retail in India, we see great potential to grow".

Walmart plans to link consumers through its partnership with kirana stores.

Walmart was engaged in a race with e-commerce giant Amazon to acquire majority stake in Flipkart, and the two firms have been negotiating a deal for more than a year. Last month, the company agreed to cede control of its United Kingdom grocery chain, Asda, merging it with British rival J Sainsbury. Following this sale, Naspers retains stakes in India's online classifieds business OLX; payment and fintech company, PayU; food delivery company Swiggy and online travel business MakeMyTrip.

Flipkart competes with Amazon across a range of product categories.

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Amazon is also investing significant money in marketing and promotions as the company looks to bring more consumers to its online shopping platform.