Well it is official now that the world’s largest offline store Walmart has acquired Flipkart. This has come to be the biggest ecommerce deal in the history of the world. There have been lot of behind the scene permutations and combinations to get this deal through.
However, a deal done on paper is still subject to regulatory approvals. At least, that’s what India Inc learnt from Vodafone’s acquisition of and exit from the then Hutchison-Essar (Vodafone India). And, in case of Flipkart, as the deal is very complex, chances are that it might get challenged in the Supreme Court of India.
Lawyers are speculating that,
“In this entire deal which saw Flipkart’s valuation at around $20.7 Bn, there is still no tax clarity as the treaties signed by India with Singapore and Mauritius changed last year.”
There are also views that,
In this case, apart from domestic income tax laws, articles from a number of income tax treaties signed by India with the US, Singapore, Mauritius, South Africa, and a comprehensive agreement with China will also be invoked.
“Flipkart India is a capital asset based in India, while Flipkart Singapore (Flipkart Pte Ltd) is the strategic shareholding company of Flipkart India. Flipkart Singapore also operates Flipkart Malaysia, Flipkart Middle East, and other companies outside India.”
As far as the law is concerned, except for Sachin Bansal and Binny Bansal’s stakes, the majority of the shares sold to Walmart belong to non-resident shareholders. They are selling their shares in a Singapore-based company — Flipkart Pte Ltd, which owns an Indian company — to a non-resident (US) company, Walmart.
Walmart intends to use a combination of newly issued debt and cash on hand. Upon closing the deal, Flipkart’s financials will be reported as part of Walmart’s international business segment. If the transaction were to close at the end of the second quarter of this fiscal year, Walmart expects a negative impact to its FY19 EPS (earnings per share) of approximately $0.25 to $0.30, which includes incremental interest expense related to the investment.
Other than the tax implications that this deal might cause, the deal also caused Sachin Bansal to part ways with Flipkart. In a fitting tribute to Sachin Bansal, who bid adieu to the Flipkart team after 11+ years of nurturing the company, Binny’s blog post touched upon the fondest memories of the cofounders of India’s first ecommerce unicorn, which will also be remembered for one of the significant exits in the Indian ecosystem and the biggest ecommerce deal in the world. The post read,
“Building Flipkart into one of the world’s most-valued tech companies will certainly be one of Sachin’s legacies. But, perhaps, a more fulfilling legacy will be that Sachin was instrumental in bringing a smile on the faces of millions of people every time they saw a Flipkart wishmaster at their doorstep,”
He further added,
“Sachin will always be seen as the face of that new, tech-powered Flipkart. A visionary, Sachin was instrumental in making Flipkart a tech-driven company, and ensuring the latest innovations were developed in-house and deployed across functions — ranging from how customers interacted with the website or mobile app, to how orders were fulfilled, to creating a delightful customer experience,”
Well, Sachin’s exit might be a bittersweet experience for Sachin, Binny and Flipkart, there will always be implications of this move.
While it is not clear what exactly led him to take this decision, the news of his sudden departure first surfaced last week and has been followed up with more reports since. The reason for his exit that is currently being circulated is that Walmart preferred to not have two co-founders on the board. Looking back at yesterday, the absence of Bansal’s comments in the official press release on the Walmart-Flipkart deal and his omission from the photos of Walmart CEO Doug McMillon and Flipkart’s other cofounder Binny Bansal doing the rounds hinted at another impending news break.
The deal is also sure to trigger envy and hunger in many other startups to follow in the lines of Flipkart. And this, perhaps, is one of Flipkart’s biggest contributions to the Indian startup ecosystem.