Walmart-Flipkart deal: IT dept seeks sale agreement to assess tax liability

Flipkart's stake acquisition 'credit positive' for Walmart Moody's

Flipkart's stake acquisition 'credit positive' for Walmart Moody's

On Wednesday, all significant shareholders in Flipkart like Naspers, venture fund Accel Partners and eBay had confirmed they were selling their shares to Walmart.

There are also reports that SoftBank was also in discussion with Walmart for deciding its role in Flipkart.

"There is likely to be capital gains withholding tax implications when the shares of Flipkart Singapore are sold by Softbank or other foreign investors".

Walmart Inc believes that it won't make any "material difference" to its plans for Flipkart even if Japanese firm Soft-Bank finally decides against selling its stake in the Indian company as the Bentonville-based giant will still enjoy a comfortable majority in the Indian company's shareholding, a person familiar with United States retailer's plans said. Here, it is worth mentioning that Flipkart is an Indian e-commerce giant.

When contacted, a SoftBank spokesperson declined to comment.

In case SoftBank decides not to sell, Walmart would be left with about 55 percent of Flipkart.

The agreement will effectively result in transfer of ultimate ownership in Flipkart India to Walmart.

Amazon had reportedly also offered to buy a stake in Flipkart before Walmart announced its own pact with the company, a deal that is expected to close later this year.

Other deciding factors would be Son's relationship with Walmart and that SoftBank likes to be a long-term investor, sources said, adding the Japanese conglomerate is very bullish on India and sees enormous opportunities for growth of investment.

The Japanese company had invested about $900 million in Snapdeal in a hope that the home grown e-tailer would be able to challenge Flipkart's market leadership, but saw the company slip to a distant third behind Amazon India by 2016.

The reason for this potential flip-flop is being attributed to a hefty tax burden that a short-term exit from Flipkart will attract for Softbank.

Global rating agency Moody's believes e-commerce firm Flipkart will continue to make losses for the next few years, even as it said that the $16 billion Walmart-Flipkart deal is "credit positive" for Walmart. Walmart could increase its shareholding by an additional 10-12%. "There will be more balance of power if SoftBank is there in the company", he said, asking not to be named as Walmart is a client of his company.

The right to buy additional stake could become crucial in Walmart's overall scheme of things at Flipkart after SoftBank's reversal in plans.

Recommended News

We are pleased to provide this opportunity to share information, experiences and observations about what's in the news.
Some of the comments may be reprinted elsewhere in the site or in the newspaper.
Thank you for taking the time to offer your thoughts.