Indian E-Commerce giant Flipkart has acquired Walmart India’s 100% stakes which operates the Best Price cash-and-carry business and launched a new digital marketplace, Flipkart Wholesale. This acquisition by Flipkart marks its strong foothold in the increasingly competitive grocery and food business. Flipkart Wholesale is focusing on addressing the business-to-business (B2B) segment in India, thus further intensifying its competition with Amazon which also operates in a similar B2B segment.
This move will also allow Flipkart to support and enable the growth of MSMEs and kiranas. The company plans to provide Kiranas and MSMEs with significant value powered by technology to make various business processes easier. And the current supply chain infrastructure of Flipkart Group will be used to reach kiranas and MSMEs.
“With the launch of Flipkart Wholesale, we will now extend our capabilities across technology, logistics, and finance to small businesses across the country. The acquisition of Walmart India… will strengthen our position to address the needs of Kiranas and MSMEs uniquely,”Kalyan Krishnamurthy, Chief Executive Officer, Flipkart Group.
Flipkart Wholesale will launch its operations in August 2020 and will be headed by Adarsh Menon who is Flipkart Senior Vice President and Head – Flipkart Wholesale. Walmart India CEO Sameer Aggarwal will remain with the company for the transition, after which he will move to another role within Walmart.
Walmart India employees will join the Flipkart Group and the home office teams will integrate over the next year. The Best Price brand will continue to function via its omnichannel network of 28 stores and e-commerce operations.
Interestingly, this announcement has come a week after Flipkart said that it had raised USD 1.2 billion in funding from a Walmart-led investor group, valuing the company at $24.9 billion. This was the largest such fundraising for Flipkart since Walmart acquired it two years ago in 2018 by investing USD 16 billion for acquiring 77 per cent stake in the group.
It’s surprising to know why Flipkart, which is a subsidiary of Walmart Inc. would acquire another subsidiary of Walmart Inc. This acquisition would attract huge capital gain taxes and result in nothing since there is technically no change in ownership and management because both these subsidiaries are owned by Walmart Inc.
Definitely, there’s a larger picture here which remains undisclosed. We feel this move was not unsolicited. Rather it’s a strategic move to avoid various Transfer Pricing compliance and taxes.