As SoftBank warrants to delay the Flipkart-Walmart deal citing a reluctance to sell shares because of tax issues, Traders’ Body Confederation of All India Traders (CAIT) has demanded scrutiny of the proposed deal, claiming that it will promote loss funding and predatory pricing in ecommerce sector.
In a statement, CAIT said, “It is really unfortunate that in spite of having a clear FDI policy, foreign companies are finding an escape route, whether it is in retail or ecommerce.”
The organisation also demanded the government to form a regulatory authority for ecommerce and has claimed that “till the authority is formed, no such deal should be allowed”. Furthermore, it also alleged that Walmart after failing to enter India in the retail sector through FDI has chosen ecommerce route, which will be quite harmful for the trading community.
Walmart Cuts Losses By 27%
Even as the proposed deal with Flipkart continues to garner the attention, Walmart India has posted its filings with the Ministry of Corporate Affairs (MCA). As per filings accessed by ET, Walmart India has reduced its losses by almost 27% during FY17, compared to the previous year.
The company also posted 10% revenue growth reaching $542.86 Mn (INR 3,641 Cr) in FY17, with expenses of $553.97 Mn (INR 3,716 Cr).
Also, the company remains “strongly committed to reopening” of the Vijayawada store which was shut down after a fire incident in August 2016.
Walmart has a strong presence in the country through its B2B arm, which currently boasts a network of 21 Best Price Modern Wholesale stores.
SoftBank Looks For Tax Cuts
With the Flipkart-Walmart deal looking much closer to completion than SoftBank was planning for, the Japanese Conglomerate is reportedly looking for ways to sell its stake in Flipkart without attracting a hefty tax liability.
Also, the group hasn’t yet decided on the part of the stake it plans to sell to enable Walmart to complete its 73% stake in the homegrown ecommerce giant. The report added that SoftBank may retain its entire stake for at least one year more to avoid paying a large tax.
The discussions on the stake are ripe and will be decided over the next week after consultations with tax experts.
Inc42 had earlier reported that Walmart has apparently decided to buy 73% of Flipkart shares, in a cash-and-stock buyout and Flipkart’s value may come to between $20-22 Bn.
If Flipkart is valued at $20-22 Bn, Walmart will have to spend at least $14.6-16 Bn to buy 73% of the stake. While Google will reportedly invest $3 Bn, SoftBank which had invested $2.5 Bn last year may have to exit from Flipkart at $4 Bn.
In line with the development, Flipkart has already bought its shares worth $350 Mn from the existing investors to reclaim its status of a private company – Flipkart Pte Limited.
Earlier, Inc42 reported that Amazon had reportedly raised an offer to buy 60% stake in the homegrown ecommerce giant. With Flipkart-Amazon merger, SoftBank was actually looking forward to the possible gateway to be a shareholder in Amazon.
On the management front, while Kalyan Krishnamurthy is likely to continue as the CEO of the ecommerce giant, co-founder and Chairman Sachin Bansal who was actually looking for a bigger role post deal until last week might exit from the company, says another report.
As SoftBank looks to delay the sellout by one year to relax tax burdens, how does the Flipkart-Walmart deal survive remains a major question.