Walmart is buying Flipkart, India's largest online store

  • Walmart is buying Flipkart, India's largest online store

Walmart is buying Flipkart, India's largest online store

India's e-commerce sector faces yet another shake-up as U.S. retail giant Walmart prepares to take a majority stake in Flipkart, a move that is expected to presage a move into online grocery sales where United States rival Amazon is already a player and where local operators like BigBasket and Grofers are developing their offer.

A day ahead of the announcement of the Walmart-Flipkart deal, the largest through the M&A route and marking the American firm's real entry into India, both organisations were in waiting.

Singapore-registered Flipkart Pvt Ltd holds a majority stake in Flipkart India. This will effectively result in transfer of ultimate ownership in Flipkart India.

The deal would be taxable in India since a substantial value of Flipkart's shares is being derived from India, the experts noted.

Sources close to the deal indicated to the Financial Times that Walmart will pay some $15bn to take a stake of around 75% in Flipkart, which was set up in 2007 by two former Amazon workers.

SoftBank Group Corp.'s fourth-quarter profit topped analysts' projections, thanks to Sprint Corp.'s first annual net income in more than a decade.

SoftBank's Vision Fund had pumped in an estimated $2.5 billion in Flipkart in August past year. So any investment in Flipkart routed throughout these countries on or after April 1, 2017, would come into the ambit of capital gains tax in India.

Walmart will likely end up with upto 80 percent of Flipkart, valuing the company at about United States dollars 20 billion.

Doug, accompanied by his top team including president and chief executive of Walmart International Judith McKenna, and CEO ecommerce Marc Lore, has flown in from the United States already to seal the deal with Flipkart. "However, Section 72A of the Act provides that if there is demerger and merger, the company can carry forward the losses".

Walmart's strategy will likely involve shifting Flipkart's current focus on consumer durables and clothing - the former category in particular is not growing as fast as previously - towards food and groceries. "It remains to be seen how the Flipkart-Walmart deal would be finally structured", Vanvari said.