Wednesday, 23 May, 2018

Walmart set to acquire India's Flipkart but face opposition from trader's body

CAIT demands govt scrutiny of Walmart-Flipkart merger deal Flipkart Board is Said to Approve $15 Billion Walmart Deal
Elsie Buchanan | 09 May, 2018, 07:55

A batch apart in the Indian Institute of Technology-Delhi, they became friends as colleagues in Amazon before starting Flipkart in Bengaluru as an online bookstore in 2007 before going on to become the country's preeminent ecommerce company.

"The deal has been sealed".

Flipkart founders Sachin and Binny Bansal may have to pay 20 per cent capital gains tax if they sell their shares in the company as part of the proposed deal with U.S. retail giant Walmart, say tax experts.

Walmart is expected to get three board seats at Flipkart and will also have a say in the appointments of the group's finance, legal and compliance heads, sources said to Reuters.

Krishnamurthy and Binny Bansal will stay within their existing jobs after the bargain, the two sources stated. The other large investors in Flipkart - SoftBank, Tiger Global, Naspers and Accel Partners - are all based outside of India.

Flipkart has also been the darling of investors and following investments from Softbank Vision Fund, eBay, Microsoft and Tencent, had in excess of $4 billion (Rs 26,800 crore) of cash on its balance sheet as on August 2017. According to the portal, while Walmart India and Flipkart will continue to maintain distinct brands after the deal, Flipkart will be listed on Indian stock exchanges in the subsequent years as a fully-owned Walmart subsidiary.

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That would seal a Walmart triumph over Amazon.com, which has been trying to take control of Flipkart with a competing offer. This is because Amazon is already the second-largest online retailer in India after Flipkart and is thus a primary competitor.

Flipkart is India's largest e-commerce group on the basis of sales but has been fighting off a huge challenge from Amazon since the USA conglomerate entered the country in 2013.

"The deal between Flipkart and Walmart is a done thing, as evident from the exit of majority of its investors". The valuation for 70-75 per cent is expected to be in the vicinity of $15.2 billion, even as Flipkart will be valued at $20 billion.

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. On its part, Walmart will signal that it is retaining the Indian management led by co-founder Binny Bansal, apart from investing in creating back-end infrastructure to boost the country's farm sector. Sources revealed to Times of India, that Bansal "wasn't aligned with the strategy and operating structure that was being proposed post Walmart coming on board".

A third source claimed Flipkart had scheduled countless batches of town hall meetings with staff on Friday, sparking chatter inside the ranks a bargain will probably impending.

Walmart is scheduled to announce its takeover of Flipkart on May 9 or 10.

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