SoftBank weighs options to cut tax liability in Flipkart stake sale

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New Delhi/Bengaluru: SoftBank Group Corp. is considering ways to sell its stake in online retailer Flipkart Ltd without attracting a hefty tax liability, as Flipkart nears a deal to sell a majority stake to Walmart Inc., two people familiar with the matter said.

SoftBank still hasn’t decided how much of its 20-21% holding in Singapore-registered Flipkart it will sell and when, the people cited above said. SoftBank may retain all of its stake for at least one year more to avoid paying a large tax, they said.

The company is expected to decide on its stake sale over the next week after consulting with tax experts, the people said.

Earlier, SoftBank, which became the largest shareholder in Flipkart when it agreed to invest more than $2.5 billion in the company last August, was pushing other Flipkart investors to wait for a rival offer from Amazon. But last week the Japanese technology and telecoms firm agreed to sell the online retailer to Walmart as all the other key shareholders, including Tiger Global Management, Naspers and Accel Partners, were firm in their preference for Walmart.

SoftBank declined to comment.

Walmart is in the final stages of talks to buy a majority stake in Flipkart and is likely to bring along search giant Google as a strategic partner and investor after the deal. Walmart will buy at least 55% of Flipkart at a valuation of $20-21 billion, but the stake could end up being higher by the time the deal closes.

Walmart will buy most its stake through secondary transactions, which will likely value Flipkart at $17-18 billion. Most of Flipkart’s existing investors are expected to sell off their entire stakes, though a few prominent investors, such as Flipkart’s earliest backer Tiger Global Management, are expected to retain a small stake. Other investors who will retain small stakes include Tencent and Naspers.

Walmart also wants Flipkart co-founder Binny Bansal (group chief executive officer) and CEO Kalyan Krishnamurthy to continue in their roles after the acquisition, the people said. Mint reported on 2 May that Flipkart’s executive chairman and co-founder Sachin Bansal had not yet taken a decision on his future or how much stock he will sell in the proposed deal. The Economic Times reported on Friday that Sachin Bansal may leave Flipkart after the conclusion of his company’s sale to Walmart.

Binny Bansal and Krishnamurthy, a former executive at Flipkart’s most influential shareholder Tiger Global, are likely to continue in their current roles after the deal.

The two people cited above said that Sachin Bansal is likely to leave the company.livemint