New Delhi: SoftBank founder Masayoshi Son yet not decided to sell its 20-22% stake in Flipkart to Walmart Inc., sources close to the company told to Pixr8 News.
After seeing the valuation of the company, Masayoshi Son is in dilemma and will take a call in the next 7-10 days on whether to exit India’s biggest online retailer or stay invested for a long time.
If SoftBank decides not to sell its stake then Walmart left with about 55% stake of Flipkart. All other significant shareholders like Naspers, venture fund Accel Partners and eBay had confirmed selling their shares in Flipkart to Walmart.
Though on Wednesday, Us retail giant Walmart Inc has announced that it will pay about $16 billion to buy 77% stake in Flipkart. A statement issued by Walmart identified Flipkart co-founder Binny Bansal, Tencent Holdings Ltd, Tiger Global Management LLC and Microsoft Corp. as the investors who would hold the remaining 23%, implying SoftBank had agreed to sell its 20-22% stake.
Sources, however, said SoftBank is yet to take a call on exiting Flipkart. The factors that hold key to the decision include the tax SoftBank has to pay on profits it would earn from such share sale. SoftBank had invested $2.5 billion in Flipkart and exiting the company would fetch it up to $4.5 billion.
The $2 billion profit would be taxed as per Indian law. Since the profit is made from shares that were held for more than two years, it would attract a long-term capital gains tax of 20% plus surcharge and education cess, effectively wiping away a fourth of the profit.
Other deciding factors would be Son’s relationship with Walmart and that SoftBank likes to be a long-term investor, sources said, adding the Japanese conglomerate is very bullish on India and sees immense opportunities for growth of investment.
Sources said Walmart had indeed courted SoftBank for buying its shares but the Japanese group has not yet taken a final call on the issue.
On 9 May, hours before Walmart was scheduled to announce the Flipkart acquisition, SoftBank chief executive Masayoshi Son told an investor call on his company’s earnings that Walmart had agreed to buy a controlling stake in the Indian e-commerce company.
“Last night, (they) reached a final agreement and it was decided that Flipkart will be sold to America’s Walmart,” Son had stated in Tokyo, according to an AFP report.
He had gone on to state that the $2.5 billion that the Japanese company through its Vision Fund had invested in Flipkart was worth about $4 billion in the deal. He had not clearly stated if SoftBank had agreed to sell the stake at such valuations.
South African internet and entertainment firm Naspers, which had invested $616 million in Flipkart in August 2012, sold its entire 11.18% stake in the company to Walmart for $2.2 billion. eBay said it is selling its stake in Flipkart for about $1.1 billion.