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

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

Walmart has further shown its intention to purchase additional $3 billion in the online shopping portal, which will make 85% shareholding in Flipkart.

While this is Walmart's largest acquisition to date, to put this investment into perspective, $16 billion for the purchase amounts to only 6.5 percent of Walmart's $245 billion market cap.

To be sure, the ESOP pay-out by Walmart will still be the biggest-ever in the Indian start-up world and is expected to turn a few hundred Flipkart employees into crorepatis.

Dan Neiweem, co-founder and principal of Avionos, a digital solutions firm, said Walmart is looking to grow its online channel by buying into the early stages of e-commerce in India.

The Japanese company had invested about $900 million in Snapdeal in a hope that the home grown e-tailer would be able to challenge Flipkart's market leadership, but saw the company slip to a distant third behind Amazon India by 2016. It had bought 23.6% stake in $2.5 billion past year. The deal still has to face Indian regulators. But over the weekend, Walmart lifted a bit of the veil by indicating that this was an offshore transaction under which Walmart Inc and its fully-owned subsidiary, Walmart International, would acquire the stake in Flipkart Private Limited, a Singapore-based entity that virtually controls the Flipkart empire, which houses nine entities.

Also, Walmart management anticipates this tie up will constrain earnings to the tune of 5%-11% over the next two years (as Flipkart has failed to turn a profit), given the growth potential.

Furniture rental platform RentoMojo CEO Geetansh Bamania said the "Flipkart news has definitely augmented the trust over Esops and we are seeing the ecosystem talking about it and valuing it more".

Minority investors holding 60 percent of Flipkart's shares "acting together, may require Flipkart to effect an initial public offering" (IPO) four years after the close of the Walmart-Flipkart transaction, the Bentonville, Arkansas-based retailer said in a May 11 filing with the U.S. Securities and Exchange Commission.

It also said it could appoint or replace Flipkart's chief executive and other key executives of group companies in consultation with Bansal and the board. But in January 2017, Flipkart's board had reportedly made a decision to take the company public within two years. Moreover, Walmart itself has never forked out such a huge sum of money for any rival.

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