Walmart to acquire Indian e-commerce giant in largest such deal on record

An inside look at -based e-tailer ’s new Bangalore headquarters. announced yesterday its intention to acquire a 77% stake in the company. Photo:

Globally, there exist just a few companies that could fetch more than the estimated $16 billion yesterday announced it will be paying for a 77% stake in ’s leading homegrown player, . Pending customary regulatory approval, the acquisition could upend efforts by giants like and to expand their presence in the nascent n market which is seen as having great potential.

Or perhaps, it won’t.

With 54 million active users across ’s various platforms, and some $7.5 billion in annual gross merchandise volume (GMV), it’s clear why saw as an attractive target to build market share in .  Some experts familiar with the deal, however, point out that beyond GMV, ’s financials are not glowing, and could be purchasing a dud propped-up by blockbuster investments. Venture Capital firm Tiger Global put up $1 billion over a series of investments that began in 2009, and last year Japan’s SoftBank Group Corp. invested a whopping $2.5 billion in the e-tailer. While such investments have enabled to expand its business and boost revenues, the company lost $1.3 billion during its fiscal year 2017.

Looking at the broader market in , the sector has become an attractive vehicle for investment for a number of reasons.  Compared to more mature markets like China and the United States, penetration in is relatively small. The Economist notes that just 5-10% of ns have purchased goods online, and the country’s overall market size is valued at $15 billion – a mere fraction of China’s trillion-dollar market. ’s investment is thus a long-term bet that ’s market will continue its rapid ascent, while in parallel remains a dominant force in the market.

Given ’s population of 1.3 billion and rapidly growing middle class, most signs point to burgeoning growth, and other e-tailers have recognized this potential. Like , seeks to avoid missing its opportunity to secure a foothold in the growing digital sales market, as both companies did in China.  Even if the market grows to $200 billion by 2026 as a 2017 Morgan Stanley report estimated, will face steep competition from , , and other domestic players. invested an initial $2 billion in when it entered the market in 2014 and has since pledged to spend $3.5 billion more. , meanwhile, acquired online grocery retailer BigBasket this year, and has earmarked funds for other investments in .

Irrespective of which e-tailer ultimately comes out on top in , the more important topic relates to the future role of air freight when it comes to domestic and supply chains and fulfillment in the country. Since we do not have an answer today, we’ll save that discussion for a later date. In the meantime, Cargo Facts will continue following emerging developments in the n air freight and express markets.

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