SoftBank Still Uncertain over Flipkart Deal

Japan's SoftBank Group Corp has not yet decided to sell its 20-22 per cent stake in Flipkart to US retailer Walmart Inc, sources with direct knowledge of the development said. 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.

Walmart had on Wednesday announced that it will pay about USD 16 billion to buy 77 per cent stake in Flipkart. A statement issued by Walmart that day identified Flipkart co-founder Binny Bansal, Tencent Holdings Ltd, Tiger Global Management LLC and Microsoft Corp as the investors who would hold the remaining 23 per cent, implying SoftBank had agreed to sell its 20-22 per cent stake.

Sources, however, said SoftBank is yet to take a call on exiting Flipkart.

The factors that hold key to the decision include the tax SoftBank has to pay on profits it would earn from such share sale.

SoftBank had invested USD 2.5 billion in Flipkart and exiting the company would fetch it up to USD 4.5 billion. The USD 2 billion profit would be taxed as per Indian law.

Since the profit is made from shares that were held for more than two years, it would attract a long-term capital gains tax of 20 per cent plus surcharge and education cess, effectively wiping away a fourth of the profit.

Other deciding factors would be Son's relationship with Walmart and that SoftBank likes to be a long-term investor, sources said, adding the Japanese conglomerate is very bullish on India and sees immense opportunities for growth of investment.