Walmart makes mark in India

Flipkart Chart3

SAM, Khaitan, Hogan, Gunderson, CAM on biggest e-commerce deal: Walmart acquires 77% stake in Flipkart

SoftBank's Masayoshi Son has still not chose to sell SoftBank Vision Fund's 21 per cent stake stake in India's largest online retailer Flipkart to U.S. retailer Walmart Inc, according to two reports today citing unnamed sources.

The decision is a result of the recent Flipkart-Walmart deal, one of the biggest e-commerce deals in which the American retailer acquired 77 per cent stake in the biggest online retailer of India for $16 billion. With this deal, the United States retailer has finally got a way into India's retail market after playing at the fringes for over a decade. However, the arrangement is likely to get dissolved due to Walmart's deal with Flipkart.

"Treaty provisions will not apply on indirect transfers that have Indian assets as underlying", said another official, referring to double taxation avoidance agreements, in this case, the one between India and Singapore. The biggest buyout deal of Walmart has boosted ESOPs (employee stock ownership plans) of Flipkart to a total of $2 billion.

Industry watchers see fresh challenges for domestic cash & carry retailers, as an intense fight between two global biggies, Walmart and Amazon, for bigger market shares may mean more discounts and sale days for offline players, squeezing margins.

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Companies like Flipkart and Amazon run as e-commerce marketplaces- a segment where 100% FDI is allowed.

The EPS headwind could harden in FY20, rising to as much as 60 cent per share, the company said.

"Therefore, being the controller of the company, Walmart may use the data and other information as per its will and wish and the possibility of compromising the data cannot be ruled out", he said, according to the statement. It also announced that it will closely study the metrics of the deal and move to the Government or appropriate Authority to seek a ban on the deal till the time all related issues are resolved satisfactorily.

Furthermore, in light of the Flipkart-Walmart deal, there are chances that Flipkart might introduce a wider range of products with Walmart's backing.

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"Online groceries would be where Walmart-Flipkart and Amazon would start focusing going forward", CMR said.

The report further said, "SoftBank believes in the upside potential of Flipkart under Walmart leadership, which could eventually offer an exit to the remaining shareholders by taking the company public in the U.S.". There have been a lot of developments since the news broke out, from Sachin Bansal quitting Flipkart to the latest news that about $500 million is being outlined towards liquidity of employee stocks.

However, given the cutthroat competition in India's thriving e-commerce sector and this being eBay's second foray into the Indian market, the company will have to adopt a stronger and more innovative technology to surge a successful comeback.

With more start-ups entering the scene, Shah expects a steady increase in cross-border deal activity.

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