Published: Mon, May 14, 2018
Science | By Joan Schultz

Walmart May Launch Flipkart IPO In As Early As 4 years

Walmart May Launch Flipkart IPO In As Early As 4 years

The filing said that the IPO must not be done below the value which Walmart invested in the Indian e-commerce firm. Among potential investors in the company is Alphabet, the parent company of Google, which has been in discussions with both the parties to invest as much as $3 billion into Flipkart.

Flipkart's board of directors, it said, would initially have eight members, five of which would be appointed by Walmart, two by certain minority shareholders, and one would be Binny Bansal.

That bargain can possibly be sealed until the end of their Walmart Flipkart transaction or just after, a source told Reuters, declining to be named since the talks are still private.

Walmart's filing also said it might appoint or replace chief executive officer and other principal executives of the Flipkart group of companies, subject to certain consulting rights of the board and the founder. This included $14 billion earmarked for purchasing shares from existing shareholders and fresh capital infusion of $2 billion in Flipkart. The IPO should be done at a valuation no less than that paid by Walmart under the share issuance agreement, subject to the satisfaction of other conditions regarding such offering. Also, there will be no termination fee payable by any party if the share issuance agreement or the share purchase agreement were terminated. In fact, the Beast of Bentonville had also said that it hoped to meld Flipkart's numbers into the revenues of Walmart's worldwide operations by the end of the second quarter and had suggested that might impact the company's earnings per share by up to 30 USA cents. Of the five directors Walmart can appoint to Flipkart's board, two must be unaffiliated to the Bentonville, Arkansas-based company.

As per SEC filing, Walmart may take Flipkart public in four years.

"As Flipkart is expected to generate meaningful losses for at least the next few years, this is clearly an investment for the future", said Charlie O'Shea, VP and Lead Retail Analyst at Moody's in commentary provided to Retail TouchPoints.

Following the acquisition, all significant stakeholders in the Indian online retail giant like Naspers, venture fund Accel Partners and eBay had confirmed they were selling their stocks to Walmart.

In certain situations, Walmart and a percentage of Minority Shareholders may exercise a "drag along" right to cause the remaining Minority Shareholders to sell all or a portion of their shares in a sale of Flipkart.

For Walmart, the acquisition opens a new front in its battle with Amazon, which had expressed interest in making a competing offer for a stake.

The right of first refusal for the minority shareholders will expire if Walmart owns 85 per cent of the outstanding shares of Flipkart, it added.

USA retail giant Walmart is looking to retain Flipkart co-founder Binny Bansal and other minority investors such as Tiger Global for at least four years, promising that it will protect the valuation of their shareholding and offer them the potential upside of taking the company public.

SoftBank's Masayoshi Son will take a call in the next 7-10 days on whether to exit India's biggest online retailer or say invested for some more time, they said adding that factors that hold key to the decision include the tax SoftBank has to pay on profits it would earn from stake sale amongst other considerations.

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