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Walmart Investors Anxious About Its $16 Billion Flipkart Deal

Walmart (WMT) announced the biggest deal in its 56-year history on Wednesday, but investors seemed less than impressed with the $16 billion stake in Indian e-commerce leader Flipkart, focusing instead on how long it might take for the investment to pay off.

The world’s largest retailer confirmed after days of media reports that it will acquire 77% of Flipkart, with that company’s co-founder Binny Bansal and other investors keeping the rest. Walmart, which is eager to outmaneuver (AMZN) in one of the most promising e-commerce markets in the world, touted the deal as a way to quickly become a leader there.

“Our investment is an opportunity to partner with the company that is leading transformation of eCommerce in the market,” Walmart Inc CEO Doug McMillon said in a statement about the deal.

But the size of Walmart’s Flipkart deal, about five times what it paid in 2016 for, and the uncertainty of the impact on Walmart’s profitability discomfited investors. Walmart shares fell as much as 4.2%, extending a slump that began earlier this year.

“As Flipkart is expected to generate meaningful losses for at least the next few years, this is clearly an investment for the future,” Moody’s analyst Charlie O’Shea wrote in a research note. Walmart also recently said it would sell a majority stake in its U.K. Asda chain, a move O’Shea said demonstrated Walmart’s strategy to shift its focus to growth markets.

Walmart, whose profits have already been pinched by efforts to build up its e-commerce in the United States, notably grocery delivery and pickup, has already tested investor patience for the past few years with its tech investments. Walmart in 2016 bought for $3.3 billion to kick start its U.S. e-commerce in its biggest market by far. (The U.S. generates about 59% of company revenues.)

But in the holiday quarter, U.S. online sales growth slowed considerably and the company said it would shift some resources away from to, a disappointing turn of events that could help explain investors’ anxiety about the Flipkart news. Walmart did, however, tell investors in February to expect 40% online U.S. growth this year.

Morgan Stanley has estimated India’s e-commerce will grow sixfold to some $200 billion in about 10 years, and though it will be a tough slog, it at least spares Walmart from having to build a fleet of stores, something it had tried in the past but was stymied by Indian laws that restrict foreign retailers that sell multiple brands.

Walmart has been able to open 21 cash-and-carry wholesale stores in India that sell to businesses — peanuts compared to the e-commerce opportunity and, more crucially, pitiable compared to the position of Amazon, which accounts for nearly a third of India’s e-commerce market. It is also not the first time Walmart has teamed up with a local player in a foreign market: In China, Walmart owns 12% of, and in Japan, it works wth Rakuten.