SoftBank still undecided on sale of Flipkart stake to Walmart

Not an easy path

After a long negotiation, India's largest e-commerce company, Flipkart has chose to sell its 77 percent of company's stake to U.S. retail giant Walmart at $16 billion which is the largest e-commerce deal in India. The Hindu Business Line recently claimed that Alphabet will invest $3 billion for a 10% stake in Flipkart.

"As of now, SoftBank has not exited Flipkart".

The Bentonville, Arkansas-based retail behemoth Walmart Inc yesterday announced acquisition of 77 per cent stake in Flipkart for about United States dollars 16 billion in its biggest deal till date. "Plans are on track", Walmart India President and CEO Krish Iyer told PTI.

The All India Online Vendors Association (AIOVA) too expressed its reservation over the probability of Walmart bringing in its own private labels via Flipkart to Indian consumers at hyper-competitive prices, which will cannibalise the market and make it hard for other sellers to operate. Founder Jeff Bezos has promised to pump in more than Dollars 5 billion to win the Indian online retail market.

When contacted, a SoftBank spokesperson declined to comment. Sachin Bansal, who met Binny Bansal in 2005 at the Indian Institute of Technology, Delhi, is not related to Binny, but both had worked for Jeff Bezos led company Amazon.

Sellers have always been at loggerheads with online marketplaces Flipkart and Amazon on several issues including discounts sharing, commission margins, and alleged edge afforded to in-house vendors.

Flipkart founder Sachin Bansal has made the shocking decision to leave the ecommerce company. "Soft-Bank's fund is registered in Jersey and they are suffering a huge tax liability because there is no DTAA protection with Jersey".

In this case, apart from domestic income tax laws, articles from a number of income tax treaties signed by India with the US, Singapore, Mauritius, South Africa, and a comprehensive agreement with China will also be invoked.

SoftBank may hold the Flipkart stake for 6-12 months with a view to avoid the short-term taxation problem, the report added.

"Since the deal has a greater ramification on India's retail trade, a closer scrutiny is certainly warranted".

The statement also said that Walmart's collaboration with Flipkart will also support small businesses by procuring directly from them.

USA retail giant Walmart hopes to become a success story in India following its US$16bn purchase on Wednesday (9 May) of a majority stake in Flipkart, India's biggest online retailer, according to media reports.

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