Walmart makes a $16 billion bet on India’s booming economy

Michelle C. | Anne D’innocenzio
NEW YORK, EU.- Walmart will soon reach shoppers in India’s massive consumer market directly, as it takes control of the online retailer Flipkart that’s known for its ubiquitous delivery drivers on their motorcycles with oversized backpacks.

The $16 billion controlling stake, announced Wednesday, is the largest acquisition yet by the world’s largest retailer.

Retail sales are being fueled by a hot economy in India, and both Walmart and Amazon have pushed hard to catch up to Flipkart and become the first major US retailer to establish a substantial foothold in the country.

The move, like Walmart’s decision last month to sell its British unit, Asda, reflects the company’s focus on areas with the potential to grow as it tries to narrow the online gap between itself and Amazon.

Online buying in India has exploded in recent years, and Flipkart had net sales of $4.6 billion in its latest fiscal year, That’s a fraction of Walmart’s latest annual revenue of $485.8 billion, but the company sees big long-term potential. Walmart believes India, which has 1.3 billion people, could be the world’s top five-e-commerce markets within the next five years.

“We are actively working to shape the portfolio of geographies and businesses we’re in, in order to set the company up for success for another generation,” Walmart CEO Doug McMillon said in a conference call Wednesday.

Flipkart is, in some ways, an echo of Amazon. Founded in 2007 by two college friends and former Amazon employees, Flipkart began life as an online bookseller.