Walmart-Flipkart deal set to be announced? Here's what could follow

Last Updated: Wed, May 09, 2018 12:33 hrs
Walmart Flipkart (AP image)

Sources have shared that Arkansas​-​ based Walmart Inc. has apparently completed a round of discussions with the board at Flipkart. Information pertaining to the deal is expected to be announced on Wednesday said various news sources, even as analysts and media reporters poured in copious realms of speculative stories that confirmed ​a ​ 7​0​ %​-75%​ sale of ownership to Walmart was almost done and ​dusted. ​​

The entire media glare ​is similar to what ​happens​ a month prior to the launch of a hi​gh​-end smartphone​ . Right from writing on teasers to ​carrying unconfirmed pieces of information​ ​ - ​all the ​speculation is served on ​a ​ platter. ​The Flipkart-Walmart deal is no different. ​ ​

A deal between the ​w​orld's ​largest physical retailer and India's desi upstart has already set eyes rolling. The coverage is ​similar to how the four blind men perceive​d​ the giant elephant in the room. Everyone feels a part of it, but nobody can concretely visualize or feel the Elephant in the room. The elephantine factors in this deal include Flipkart's reach in India and the size and worldwide presence of Walmart Inc. ​

Surprisingly much before the news has even been announced, there is already speculation on how much Sachin and Binny Bansal ​will get . There were also reports of Flipkartians (proud employees calling themselves) becoming crorepati employees on social media. A $2.75 billion payday for Flipkart's Binny Bansal was in the offing​, a report said​ .​ Another report speculated that Sachin Bansal was set for an exit after selling his 5.5% stake, but at a much lower $1 billion value.​ Much before the deal got materialized, the founders have already been labelled billionaires by various news reports. ​ ​

The Walmart-Flipkart deal is as ​big a deal​ for the Arkansas based retailer as it is for the employees, founders and investors currently associated with Flipkart. ​ ​

The investment in Flipkart is poised to be Walmart's mother of all deals in nearly two decades. Walmart's acquisitions in 2017 includes ($70 million), Parcel (Estimated at lesser than $10 million), and Bonobos ($310 million). ​ ​

An investment bet in Flipkart, will ​make it the biggest weapon Walmart's arsenal against Amazon. Amazon holds a 27% share of India's $30 billion e-commerce market, while Flipkart is the leader at 34%, according to data tracker Euromonitor​​ . Another reason for Walmart to push for the stake-sale could be to avoid a mistake they did in China. Walmart and Amazon both have lost sizable opportunities in China thanks to Alibaba, the market leader. An opportunity closer to China, which is heating up as the World's second largest e-commerce market​,​ is a huge opportunity hence for Walmart. ​ ​

On the deal front, there is nothing concrete yet, except for a story from Bloomberg that said an announcement was likely to be made on Wednesday. Besides, Flipkart itself was reported to have planned on organising a townhall for its employees on Friday. This meeting is likely to be attended by Walmart's CEO says Reuters. ​ ​

Besides the reams of speculations in the run-up to the confirmation, a fresh angle of the larger compliance ​issues ​ surrounding the deal have surfaced. The complexities involve navigating the tax related​ subjects , as well as ​gaining ​ regulatory approvals from authorities, most importantly the Competition Commission of India (CCI). ​ ​

A report by​ the​ P​ress T​rust of ​ I​ndia​ detailed the tax perspectives that the new merger may have to deal with. Previously an approval from the Competition Commission of India was considered as the most sought after for the parties, but the likelihood of an acquisition has started murmurs on how much Flipkart and its set of new and old investors may get taxed. ​ ​

Flipkart's founding promoters- Sachin and Binny Bansal may pay 20% capital gains tax as part of the proposed deal said tax experts. But there was another angle besides the capital gains tax​ ​ - that of carry-forwarding the losses against income tax payable to the company. This according to experts would also depend on the country from where money has been routed, and the tax treaties that India has signed with those countries. ​

There is ​a further twist to the Flipkart story with its competitor​ ​ - Amazon ​India - ​ receiving fresh investments of Rs 2600 crores on April 26 2018. News reports quoted an Amazon India spokesperson as saying "As India's fastest growing e-commerce player with a long-term commitment to make e-commerce a habit for Indian customers, we continue to invest in the necessary technology and infrastructure to grow the entire ecosystem". ​

Was the fresh funding for its tech and strategic expansion? Nothing concrete on this front too.

Amid the complicated maze of compliance, and numbers running into billions, it seems unlikely that either Flipkart or a Walmart would confirm the deal value. ​

The development will also be monitored closely by small​- time traders and associations, prominent among them the Confederation of All India Traders who wrote to Suresh Prabhu​,​ the ​M​inister for Trade​,​ saying the deal was "contrary to interests of India's retail trade." ​​

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