Published: Mon, May 14, 2018
Finance | By Loren Pratt

Walmart's deal to buy Flipkart came with an interesting caveat

Walmart's deal to buy Flipkart came with an interesting caveat

It now holds over 70% stake in Flipkart.

However, in a catch of this speculation, Softbank can invest in Paytm Mall only if it finalized its exit from Flipkart. It also said it supported Flipkart's ambition to go public.

Currently, both Amazon and Flipkart control a respective 35 percent of India's e-commerce market, which is estimated to be a $30 billion market today but poised to grow into a $200 billion market within the next 10 years.

The tax department had last week written to Bentonville-Arkansas based Walmart saying that the United States company can seek guidance about the tax liability under Section 195 (2) of the I-T Act.

Led by Vijay Shekhar Sharma, Paytm Mall has been quietly encroaching the Indian e-commerce market, replacing Snapdeal as the third-largest player after Flipkart and Amazon India.

Last week, Walmart agreed to buy a 77% stake in Flipkart for $16 billion with the rest being held by minority investors, chiefly Tiger Global Management, Tencent Holdings, Microsoft and co-founder Binny Bansal.

Sources said to PTI that SoftBank is yet to take a call on exiting Flipkart.

SoftBank is undecided on selling its Flipkart shares because of tax implications and also because it sees a further increase in valuation for Flipkart.

SoftBank acquired Flipkart shares less than a year ago for $2.5 billion, which now have a net value of $4 billion.

When contacted, a SoftBank spokesperson declined to comment. Barely days after Walmart announced its plan to buy Flipkart, online marketplace eBay said it will end its strategic partnership with the latter and relaunch eBay India with a differentiated offer to focus on cross-border trade.

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.

Following the announcement, it affirmed Walmart's Aa2 rating and stable outlook.

"So if SoftBank says something that Walmart doesn't agree with, there still have to be discussions".

Walmart has recently bought majority stake in Flipkart for a whopping ₹1.12 lakh crore.

Now, as a matter of fact, Softbank could now invest more in Paytm Mall as post Walmart-Flipkart deal the Japanese firm could now set itself free from a clause in its agreement with Flipkart that restricts it from investing more than $500 million in Paytm Mall until 2020.

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