Softbank sale of Flipkart shares clears the way for Walmart in India

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There’s good news for Walmart in their Flipkart takeover deal – it’s being reported that Softbank have agreed to sell their 21% stake in Flipkart to Walmart meaning that the deal is now almost certain to go ahead.

The sticking point for Softbank was a possible double tax liability as they’re based in Jersey and could end up paying tax in Jersey and in India on their profits. Reports say that they’ve decided to do what’s best for Flipkart and, regardless of tax liabilities, I wouldn’t feel too sorry for them as they stand to make a $4 billion profit on their $2.5 billion investment in Flipkart. The alternative could have been Walmart increasing their investment in Flipkart which would have diluted Softbank’s share anyway.

Walmart will end up investing around $16 billion and end up owning something like 77% of Flipkart once the deal goes through which could still take a while – probably not until after the end of summer but before the end of 2018.

How this will play out in India is anyone’s guess. eBay are now retrenching and relaunching eBay India. Amazon are forging ahead with their investments in India and fast gaining traction and could conceivably quickly become the number one player if the Walmart/Flipkart marketplace doesn’t rapidly accelerate. Whilst that’s all going on in the background, Softbank haven’t abandoned India and are likely to increase their investments in PayTM, an Indian ecommerce payment system and digital wallet company.

PayTM, as well as being a payment system, also have an ecommerce marketplace which competes against Flipkart et al, so the battle for market share in India is well and truly on.

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