Walmart expected to announce deal to buy majority stake in India's Flipkart

Posted May 09, 2018

As reported earlier, Walmart will acquire over 70 percent stake in Flipkart in a deal worth over $15 billion. While the company will get around 60% stake in Flipkart, Google's parent company, Alphabet, will get the other 15%. India is the new battleground for two top American retailers - physical Walmart versus digital Amazon. The bank had acquired the shares from Flipkart via investment fund. Walmart will pay the bank approximately $20 billion.

Sachin and Binny Bansal, both former Amazon.com Inc employees, founded Flipkart in 2007, and like their USA rival, began by selling books. What is the need to sell Flipkart to Walmart? The first book it sold was John Wood's Leaving Microsoft to Change the World.

Secondly, whether Flipkart India is allowed to carry forward the losses for the adjustment against income tax payable by the company.

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In 2011, Flipkart domiciled to Singapore, as it looked to woo foreign investors to fund rapid growth. It has 100 million registered users, 100,000 sellers, 21 warehouses, 10 million daily page visits. Kalyan Krishnamurthy - Flipkart's CEO and an ex-Tiger Global executive who is credited with having turned around the e-tailer over the past couple of years - will also stay on but won't be taking up a board seat. The Flipkart group now includes fashion portals Myntra-Jabong, payments unit PhonePe and logistics firm Ekart. But the board members had turned down the proposal. "With regard to share purchase agreement entered into with India resident entity, Sachin Bansal and Binny Bansal in this case, capital gain would be charged in their hands and they have to pay 20 percent income tax", Vanvari said.

According to Greyhound Research chief analyst and CEO Sanchit Vir Gogia, Walmart adding Flipkart to its kitty will act like a shot-in-the-arm and give it a significant up against ace competition, Amazon.

According to sources with knowledge of the matter, Softbank, which has roughly 21% stake in Flipkart, is now consulting with multiple tax consultancy firms over how it can sell its holdings without attracting hefty liability. Sachin is expected to exit the firm post the Walmart buy, while Binny may retain a portion of his stake in the company. Sachin has invested in seven and Binny in 17 start-up ventures with a total funding of $26 million and $32 million respectively as on December 2017, in domains such as edtech platform Unacademy and two-wheeler start-up Ather Energy, among others. Flipkart was last valued at about $12.5 billion when it raised $2.5 billion from Masayoshi Son's SoftBank past year.