US retail giant Walmart has signed a definitive agreement to acquire a 77 per cent stake in India’s largest e-commerce marketplace Flipkart with an investment of around $16 billion, making it the largest transaction in history of the online retail space globally.

The deal, which wiped away $10 billion of Walmart’s market capitalisation as investors reacted negatively in early morning trade on the New York Stock Exchange, stands out for several exits.

The biggest was Sachin Bansal selling his entire 5.96 per cent stake for $1.23 billion and parting ways with Flipkart that he had founded in 2007 along with friend from IIT, Binny Bansal.

Sachin was nowhere around at the Flipkart campus when the Walmart top team led by CEO Doug McMillon addressed employees in a townhall meeting Wednesday evening.

Another significant exit is that of SoftBank, the largest investor in Flipkart. In a strange coincidence, the deal, valuing Flipkart at $20.8 billion, was announced to the world by SoftBank Chief Executive Masayoshi Son in a webinar with investors hours before Walmart did so.

He also confirmed that SoftBank would get about $4 billion from its $2.5-billion investment in Flipkart last August.

Flipkart’s valuation at $20.8 billion is a 75 per cent increase over its previous valuation in the range of $11-12 billion last August. Out of the $16-billion investment, Walmart will put in $2 billion in new equity funding, while the rest will be utilised to acquire stakes of existing investors in the Bengaluru-based company.

Walmart said it would eventually look at the public listing of Flipkart as a majority-owned subsidiary though the company did not share a timeline for this. The Bentonville, Arkansas-headquartered company said the deal would be closed later in the current calendar year, subject to regulatory approvals. While the deal was being watched by world leaders, back home there were voices of protest.

The RSS economic wing called it Walmart’s backdoor entry into India, and traders’ association CAIT argued the deal would “vitiate Indian e-commerce’’.

Retail majors, including Kishore Biyani of the Future group, too, watched the deal with interest and told that strategic deals with online players would be the future of retail in India.

The deal, advised by JP Morgan from the Walmart side and Goldman Sachs for Flipkart, would bring in the largest piece of FDI into India. This would give Walmart access to the fast-growing online retail space in the country. More than anything else, this would help Walmart fight its battle with rival Amazon, which lags behind Flipkart in terms of gross merchandise value (GMV).

But the Indian authorities are already asking Walmart and Flipkart about the tax liabilities post the mega transaction. According to global research and analyst firm Forrester, India’s e-commerce sector hit $19.2 billion in sales in 2017 and is expected to grow to $73 billion by 2022, at a compound annual growth rate of 30.62 per cent.

After the US and China, India is expected to be the next big market for online retail and is the last large, untapped market globally.

“India is one of the most attractive retail markets in the world, given its size and growth rate, and our investment is an opportunity to partner with the company that is leading transformation of eCommerce in the market,” said Walmart’s McMillon.

“Our investment will benefit India providing quality, affordable goods for customers, while creating new skilled jobs and fresh opportunities for small suppliers, farmers and women entrepreneurs,” he added.

Flipkart and Walmart also said they were in discussions with other investors to participate in the round without offering any details of who these additional investors could be. Insiders say, Alphabet, the parent company of Google, has shown interest to invest in the online retail firm and is in discussion with them. While further investments in Flipkart could bring down Walmart’s overall stake in the company, it said that it would retain “clear majority ownership”.

After the deal is closed, Binny Bansal, co-founder and Group CEO at Flipkart, will continue to hold the same position. “Walmart is the ideal partner for the next phase of our journey, and we look forward to working together in the years ahead to bring our strengths and learnings in retail and eCommerce to the fore,” said Binny Bansal. “This investment is of immense importance for India and will help fuel our ambition to deepen our connection with buyers and sellers and to create the next wave of retail in India.”

Flipkart’s second largest shareholder, Tiger Global Management, will sell a large portion of its shares and retain a small holding in the company, according to sources. Kalyan Krishnamurthy, who became the CEO of Flipkart in January 2017, will retain the position under Walmart’s control. He was a top-ranking executive at the New York-based investor and a key aide of Lee Fixel, Partner at Tiger Global.

In a call with investors, Walmart management reposed strong faith in the existing leadership at Flipkart and its subsidiaries including Myntra and PhonePe. Walmart said Tencent, Tiger Global and Microsoft will continue to be its strategic and technology partners.

Experts says Walmart still has an uphill task of competing with Amazon, which it has struggled to do on its own home turf in the US. Satish Meena, Senior Forecast Analyst at Forrester Research, said while Walmart can utilise its sourcing and retail prowess to aid Flipkart’s efficiency, it still needed to come up with a product that can match Amazon’s Prime loyalty programme.

While the deal gave Walmart access to India, which is the largest market outside of the US and China, its stock could continue to see pressure from investors post the deal.

Unlike Amazon’s investors who reward the company for diverting profits to win in new markets, Walmart’s stock is significantly undervalued and they’d have to answer a lot more questions about their India investment considering Flipkart was still making losses, he added.

The company’s stock was down 5.3 per cent before the market opened in New York, and subsequently started recovering.