Walmart or its components could question Flipkart to issue new common shares of up to 3 billion until the closing of their "transactions and before or on the very first anniversary of their final", it also said.
This would be done at a valuation no less than that paid by Walmart under the share issuance agreement.
The investment decision means that a valuation of almost $21 billion for Bengaluru-headquartered Flipkart.
"Pursuant to a registration rights agreement to be entered into concurrently with the shareholders agreement, holders of 60 per cent of the Flipkart shares held by the minority shareholders, acting together, may require Flipkart to effect an initial public offering following the fourth anniversary of closing of the transactions", Walmart said.
The remaining 23% stake in Flipkart will be held by minority shareholders including co-founder and group chief executive officer Binny Bansal, Chinese Internet conglomerate Tencent, investment firm Tiger Global and software firm Microsoft Corp.
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This deal has also led to a restructuring of the Flipkart's board of directors from 10 members to eight. The Masayoshi Sonled, SoftBank group invested $2.5 billion in Flipkart in August a year ago through its $100 billion Vision Fund. Walmart is investing $2 billion (approximately Rs 134.78 crore) in cash and purchasing shares worth $14 billion ( approximately Rs 944 crore) from Flipkart's existing shareholders, the SEC filing said.
"Immediately after the closing of the transactions, all Flipkart preference shares will convert into ordinary shares", Walmart said.
Walmart said it could appoint or replace CEO and other key executives of Flipkart in consultation with Bansal and the board.
A Morgan Stanley study a year ago mentioned that increasing internet and a boom in smartphone adoption, in addition to rapid economic growth, could make India's bourgeoning e-commerce sector worth Dollars 200 billion by 2026. Flipkart board made a decision to ink a deal with Walmart because it will provide long-term growth and fuel competition.
Following the acquisition, all significant stakeholders in the Indian online retail giant like Naspers, venture fund Accel Partners and eBay had confirmed they were selling their stocks to Walmart.
If Walmart transfers a sufficient number of Flipkart shares which gives rise to a situation that it no longer controls a majority of the Flipkart shares, then each minority shareholder will also be entitled to transfer all of its holding to the proposed buyer of Walmart's holding. This gains significance because Japan's SoftBank Group, which owns a roughly 20% stake in Flipkart, was rethinking its exit due to tax liabilities and because it saw further value in Flipkart.