Is Walmart chasing a mirage in Flipkart with the $16-billion acquisition?

Softbank May Invest Whopping $3 Bn in Paytm Mall, Thanks To Flipkart

SoftBank in Talks with Walmart on Selling its Flipkart Stake

The department now is going through the Section 9 (1) of the Income Tax law, which deals with indirect transfer provisions, to see if the benefits under the bilateral tax treaties with countries like Singapore and Mauritius, could be available for foreign investors selling stakes to Walmart.

In last few years, the face of Indian e-commerce has undergone a massive shift since SoftBank and Alibaba have begun investing in the fledgling Internet economy. A back of the envelope calculation suggests that Flipkart would need to generate an annual net profit of around $2 billion (Rs 135 billion at the current exchange rate) for Walmart to get a 10 per cent return on its initial investment in the company.

Softbank backed Snapdeal in the hope that the e-tailer would challenge Flipkart's dominance in the e-commerce space. Esops are now estimated to be worth more than United States $1 million.

There are also reports that SoftBank was also in discussion with Walmart for deciding its role in Flipkart.

As regards the capital gains tax made by Indian founders Sachin Bansal and Binny Bansal, the official said they would have to pay 20 per cent tax with indexation benefit, which is applicable on sale of unlisted shares by Indian residents.

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The tax department had last week written to Bentonville-Arkansas based Walmart saying that the USA company can seek guidance about the tax liability under Section 195 (2) of the I-T Act.

Sources said to PTI that SoftBank is yet to take a call on exiting Flipkart. "There are two-three other investors coming in but Walmart will always retain a clear majority", he said, adding that the Japanese giant had earlier agreed in writing to sell its stake and exit Flipkart altogether.

Bengaluru-based Flipkart had scooped up a staggering $2.5 billion round in August previous year.

A Walmart spokesperson declined to comment on SoftBank's plans.

Following the announcement, it affirmed Walmart's Aa2 rating and stable outlook. Barely days after Walmart announced its plan to buy Flipkart, online marketplace eBay said it will end its strategic partnership with the latter and relaunch eBay India with a differentiated offer to focus on cross-border trade. Post this round, SoftBank is slated to have a controlling stake. The report added that Walmart told the SEC in regulatory filings that the USA retail giant has an option to invest "an additional $3 Bn in Flipkart at the same valuation within a year of completing the acquisition of a 77% stake".

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