Flipkart Sold 77% Stake to Walmart for $16 Billion

Graphic Paras Jain  Mint

Paytm Mall enjoyed a market share of about 5.6 per cent in its first full year of operations while the Flipkart Group, including online fashion retailers Myntra and Jabong, enjoyed a combined market share of 39.1 per cent and Amazon India cornered 31.1 per cent. Flipkart is a company that is steeped in losses that swelled to Rs 8,771 crore at the end of March 2017, according to last available data. The current agreement quotes a deal with a whopping $20.8 billion that Walmart has paid to India's biggest online store. Earlier this year, Flipkart announced it was creating a hub-and-spoke network of mega-sized and smaller warehouses, all fully automated.

Also, SoftBank does not want to exit Flipkart because such an exit would mean that SoftBank is leaving Indian e-commerce industry. However, Snapdeal slipped to a distant third behind Amazon India by 2016, an ET report said.

SoftBank Chief Executive Masayoshi Son has said that their investment in Flipkart had grown to nearly $4 billion.

Masayoshi Son, CEO, Softbank Group. This was the first major investment by Alibaba Pictures outside China.

Bengaluru-based Flipkart had scooped up a staggering $2.5 billion round in August previous year.

However, in a catch of this speculation, Softbank can invest in Paytm Mall only if it finalized its exit from Flipkart. It also held out the prospect for a market flotation of Flipkart shares four years after the deal closes. "The tax rate will depend upon the facts of the case", V Lakshmikumaran, Managing Partner of law firm Lakshmikumaran and Sridharan said. Notably, if SoftBank sells its 22.3% stake in Flipkart to Walmart now or any time before August 2019 then according to India's capital gain tax law it may have to give 40% (of profit) as short-term capital gain tax to the Indian taxman, which a massive $600 million.

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A spokeswoman for SoftBank in India declined comment.

The proficients are calling it a leap of faith for Walmart.

Last week, American retail behemoth Walmart acquired 77 per cent stake in Flipkart for about Dollars 16 billion (over Rs 1 lakh crore) in the country's largest acquisition and the world's biggest purchase of an ecommerce firm.

He had gone on to state that the $2.5 billion that the Japanese company through its Vision Fund had invested in Flipkart was worth about $4 billion in the deal. SoftBank has ten days to decide whether it wants to sell its stake or not.

As Inc42 had earlier reported, "SoftBank believes in the upside potential of Flipkart under Walmart leadership, which could eventually offer an exit to the remaining shareholders by taking the company public in the United States". This is because the bank believes that the value of Flipkart will increase under Walmart leadership. The deal shows that Walmart has bought 77% stake of Flipkart for $16 billion.

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