Walmart Inc (NYSE:WMT) has staged a decision to meet the tax demand that arises from the takeover of a majority stake in leading e-commerce retailer – Flipkart Online Services Pvt. It prevents the litigation that may creep in acquiring a majority stake in Flipkart.
Mr. Doug McMillon, Chief Executive Officer of Walmart while briefing the reporters in New Delhi said the company will comply with the tax rules in India.
Walmart acquired a stake of 77% in Flipkart for $16 billion. The total value of Flipkart is estimated at $21 billion. The CEO of Walmart said the company will carry out online retail and cash and carry business as usual in India. The company will also consider implementing payments ecosystem of Flipkart like PhonePe in other nations.
Walmart has taken over 6,360 stores in countries worldwide say from Argentina to Zambia during 1999 and 2009. However, the total revenues from those acquisitions dropped considerably from 30% 5 years ago.
Walmart Drops After Acquiring a Controlling Stake in Flipkart
Walmart has drawn flank for its Indian adventure into an e-commerce retailer. The company has decided to acquire a majority stake in Flipkart for $16 billion. Post 77% stake sale to Walmart, the co-founder of Flipkart, Mr. Binny Bansal along with other shareholders will hold the balance stake.
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With taking over of Flipkart, Walmart delivers a big blow to Amazon.com, Inc. (NASDAQ:AMZN) in India.
According to the estimates of Morgan Stanley (NYSE:MS), the e-commerce market is expected to reach $200 billion from the current $30 billion in just 10 years. Walmart is poised to benefit from the flourishing e-commerce sector in India. However, S&P Global Ratings has revised the rating on Walmart to negative following the majority stake acquisition in Indian online retailer. It is on the assumption that flipkart buyout causes losses for at least the next five years.
People familiar with the development said Walmart has also set aside $500 million for the buyback of shares. It excludes payouts to Mr. Kalyan Krishnamurthy, Chief Executive Officer and Mr. Binny Bansal and Mr. Sachin Bansal of Flipkart.