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Walmart Leads New $1.2 Billion Investment in Flipkart in Battle for India’s Wallet

Walmart is upping its stake in Flipkart, leading a new $1.2 billion financing round in the Indian e-commerce powerhouse. The funding comes two years after the U.S. retail giant acquired a 77 percent stake in the Flipkart for $16 billion. With the investment, Flipkart is now valued at $24.9 billion.

Flipkart, which competes neck-and-neck with Amazon in India, said its monthly active customers figure surged 45 percent in the financial year that ended in March, and are making 30 percent more transactions. The company has recently surpassed 1.5 billion visits per month.

A group of other existing investors also participated in the new financing round, but have remained unidentified.

Earlier in July, Flipkart announced it had invested $35 million in Arvind Fashions subsidiary Arvind Youth Brands, which operates the Flying Machine denim brand in India. The two companies said the new investment strengthens their partnership as they look to serve the demands and needs of India’s “fashion-conscious youth.” Arvind Fashions began selling items on Flipkart six years ago, and manufactures and carries apparel from major international brands, including Gap, Polo Assn, Tommy Hilfiger, Calvin Klein, Arrow, Aeropostale, the Children’s Place and Ed Hardy.

“Since Walmart’s initial investment in Flipkart, we have greatly expanded our offer through technology, partnerships and new services,” said Kalyan Krishnamurthy, CEO of Flipkart, in a statement. “Today, we lead in electronics and fashion, and are rapidly accelerating share in other general merchandise categories and grocery, all while providing increasingly seamless payment and delivery options for our customers. We will continue innovating to bring the next 200 million Indian shoppers online.”

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Walmart’s investment in Flipkart is a major vote of confidence for the online retailer, which is likely going to have to fork over a large chunk of its source code and algorithms to the Indian government since the country is reportedly appointing an e-commerce regulator to ensure online sales remain competitive.

As of October 2018, Flipkart was the largest online retailer in India, with 31.9 percent market share, followed by Amazon at 31.2 percent, according to Forrester. But the third-highest retailer, fashion company Myntra, only commanded 4.7 percent market share.

The competition only continues to heat up even further. On July 8, Amazon invested $305 million into its Indian arm as part of CEO Jeff Bezos’ $1 billion pledge to bring more than 10 million small businesses online in India by 2025, with the online giant expanding its seller network in the country. Earlier this year, Amazon also signed a long-term business agreement with Future Retail Limited, which operates 1,500 locations across 400 Indian cities.

There’s also a third party that is breaking ground, spearheaded by Mukesh Ambani, the wealthiest man in India. JioMart, a joint venture between India’s largest physical retail chain Reliance Retail and telecom giant Jio Platforms, launched earlier this year in select suburban areas of Mumbai and has since expanded to more than 200 cities and towns across the nation. What’s more, Jio Platforms has both a $5.7 billion investment from Facebook and a $4.5 billion investment from Google, so American tech giants are heavily on its side.

There seems to be a lot of potential here to marry the digital and brick-and-mortar channels in a way no Indian player has yet been able to accomplish. As of January, Reliance Retail operated 10,644 locations in more than 6,700 cities across India, giving the joint venture a massive physical presence that could serve as the backbone of a countrywide omnichannel fulfillment operation.

In August, Amazon reportedly sought to acquire 26 percent of Reliance Retail, but the deal fell through, presumably due to the Indian government’s tightened regulations surrounding foreign direct investment in e-commerce businesses.

At stake is India’s continually growing population of more than 1.3 billion people, with an increasing number of first-time internet users beginning to shop online. India’s e-commerce market is estimated to reach more than 300 million shoppers by 2025, according to estimates by Bain & Company.

Over the next two years, India’s e-commerce sector is expected to be worth nearly $72 billion dollars, according to eMarketer. The India Brand Equity Foundation (IBEF) has an even more bullish prediction, forecasting that e-commerce will surge to $200 billion by 2026.