SoftBank in Talks with Walmart on Selling its Flipkart Stake


To lower its tax liability from 40% to 10%, it would need to hold the shares in Flipkart till August 2019 at the very least, which doesn't look a plausible situation after, at least for now.

After conflicting news reports that Japan's SoftBank Group Corp may or may not sell its 20-22 percent stake in Flipkart to USA retailer Walmart Inc, comes the latest news reports claiming that the Internet giant will invest in Paytm Mall.

"SoftBank can continue as any other investor as it is neither a retailer nor a direct competitor to give rise to any conflict of interest ... hence even if it changes its mind, it is welcome to do so". Ltd - just last month, SoftBank had invested $400 million (Rs 2,600 crore) for 21 per cent stake in the company also backed by China's Alibaba Group. At present, SoftBank is reportedly undecided on selling its Flipkart shares because of tax implications. Walmart is an American based world's largest retail store.

"Walmart wants to make sure that a higher price is not asked for at a later date by SoftBank", a person related to the deal said.

In the Walmart-Flipkart deal, the revenue department will go through the share purchase agreement to ascertain the objective of investment and the emanating gains.

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'Balance of Power' On the other hand, Flipkart has also held talks to bring in Google's owner Alphabet as an investor, ET had reported. He had not clearly stated if SoftBank had agreed to sell the stake at such valuations. SoftBank had alone pumped in over $5 billion in four companies including Paytm, Oyo, Flipkart, and Ola.

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 huge opportunities for growth of investment. Walmart is viewing Flipkart as a long-term bet that may take years, or even decades, to yield excellent financial returns, these people said. To remind you, SoftBank had invested over $600 million in Snapdeal in October 2014 to emerge as its biggest stakeholder. Moodys said it expects the deal to initially weaken Walmarts credit metrics, with retained cash flow (RCF) to net debt ratio likely dropping to the low-30 per cent range from 40 per cent now and debt to EBITDA (earnings before interest, tax, depreciation and amortisation) ratio likely to double from 1.6 times now.

In addition, Walmart will have a veto right "over specified decisions relating to Flipkart's business and activities", the SEC filing said, without sharing more details.

In the filing, Walmart shared some additional nuances of the deal, including its plans to take Flipkart public.

SoftBank will get around $4 billion if it sells its entire 21 per cent stake in Flipkart.