Softbank is finally putting an end to the months of speculations over his future with Flipkart post the Walmart acquisition deal. The Japanese conglomerate has now agreed to sell its 23.6% stake in Indian e-commerce major Flipkart to its new owners, Walmart for around $4 Bn.
Several reports varied over the future of Masayoshi Son’s investment firm in the e-commerce giant despite the billionaire CEO unintentionally confirming the acquisition deal on May 9. In fact, the Japan-based company was still analyzing and examining the option of whether or not staying in Flipkart.
The reason for this indecision was mainly motivated by the large amount of tax that Softbank would be subject to for leaving a company in such a short term. Softbank acquired 23.6% stakes in Flipkart last year for an investment of $2.5 Bn last year. However, SoftBank did agree with the US-based brick and mortar giant acquisition but took time to conclude its own fate in the company as the Japan-based venture was still considering its role in the future of Flipkart.
Many reports suggested that Softbank would keep its stakes in the e-commerce giant and become the second largest shareholder in the company, trailing Walmart by a significant margin. However, apparently, Masayoshi Son made a 180 degree turn on this option and decided to cash in immediately despite the tax burden.
Softbank’s Next Move
As the company looks set to exit Flipkart, its willingness to participate in the development of the Indian e-commerce landscape is still very evident.
Reports recently emerged stating Softbank was keen on investing as much as $3 Bn in Paytm Mall after holding discussions with the company’s executives. Nevertheless, due to its association with Flipkart, the Japanese conglomerate can only invest in a rival e-commerce company if it exits Flipkart. Additionally, a clause in the agreement with Flipkart prevents it from investing over $500 Mn in Paytm Mall until 2020.
Therefore, SoftBank seemed keen on investing in food delivery startup Zomato instead. Talks held with the Gurugram-based company were mainly centered around three business lines, especially the startup’s plans to expand operations abroad in the coming years.
Between April-December 2017, Softbank has poured over $5 Bn in return for stakes in several Indian-based tech companies, notably, $1.4 Bn in One97 Communication Ltd (Parent company of Paytm), $250 Mn in OYO, $2.5 Bn in Flipkart and $1.1 Bn in Ola.
Why such interest in the Indian e-commerce?
The Indian e-commerce market is currently worth $200 Bn and is expected to keep this upward growth trajectory for many years to come. The market is even touted to surpass the US e-commerce market by 2034 according to an IBEF report.
Therefore, several global investors have showed keen interest in the market such as Softbank and Chinese e-commerce giant Alibaba, which placed its hopes on Paytm Mall and in collaboration with Softbank fueled the latter’s resources with $445 Mn, giving it a unicorn status with a valuation of $1.6 Bn-$2 Bn.
As for market leaders Amazon India, its parent company, Amazon.com.inc has already invested over $5 Bn in India up to now and fueled over $3 Bn in Amazon Seller Services. A report from Citi Research claims that Amazon India alone is already valued at $16 Bn and is expected to achieve $70 Bn in GMV and $11 Bn in net sales by 2027.
As for Flipkart, after its recent $16 Bn acquisition by Walmart, the brick-and-mortar giant is reportedly set to infuse the company’s capital with $2 Bn funding.