US retail giant Walmart has acquired a 75% stake in Indian e-commerce site Flipkart for about $15 billion on Wednesday, sources told CNBC-TV18.

Walmart's purchase of a controlling stake in Flipkart includes about $2 billion of fresh equity funding.

Walmart will become the largest stakeholder in Flipkart upon completion of the deal, while SoftBank sold its 20% stake in Flipkart.

With the purchase of Flipkart, Walmart will be able to extend its expertise to managing physical goods in the digital world – a strength that Flipkart lacks.

Masayoshi Son, SoftBank's chief executive, said the vision fund investment in the Indian e-commerce major doubled in value in more than six months and confirmed that Walmart has formally agreed to buy Flipkart.

Nasper and Accel Partners will also exit Flipkart post the deal, while Tencent, Tiger Global and Binny Bansal would retain a partial stake.

The deal has political backing, and is unlikely to run into regulatory hurdles. The Walmart leadership had met Prime Minister Narendra Modi for a one-on-one meeting in Washington DC in June last year.

A three-way battle between the big boys, Amazon, Walmart through Flipkart, and Alibaba via PaytmMall is expected to ensue, as they vie for dominance over the Indian retail space.

Flipkart will look to leverage Walmart’s retail expertise and its knowledge of the grocery and merchandise supply chain management.

The investment by Walmart will help the Indian company build retail infrastructure especially in rural India, and also set up and agricultural supply chain.

Although Tiger Global would not find itself in a tax net since it was one of the early investors in Flipkart when the laws were not so stringent, other investors like SoftBank, including the founders, will need to pay significant taxes, Greyhound research said.

SoftBank, which has exited Flipkart at a premium, and the Flipkart founders are expected to be liable for a significant tax claim. Walmart, however, is likely to have factored in the tax liability into the deal.

The research firm added the combined entity will have to carefully structure and master issues around transfer pricing, as Walmart's technology arm was based in an SEZ.

Walmart’s existing Cash and Carry store business in India is also expected to continue as a separate unit, and is not expected to be mixed with the e-commerce business.

The Indian retail market is currently pegged around $650 Billion and with 90% of it being unorganised.

Earlier, Amazon had emerged as a contender for a majority stake in Flipkart, with an ofer to buy a stake of about 60%.

Read our comprehensive coverage on the deal here.

First Published:May 9, 2018 1:33 PM IST