Deal was among the best decisions, says Walmart CEO to Flipkart staff

Deal was among the best decisions, says Walmart CEO to Flipkart staff

Deal was among the best decisions, says Walmart CEO to Flipkart staff

Inc42 on Thursday decoded the tax implications of the Flipkart-Walmart deal, "In this entire deal, which saw Flipkart's valuation at around $20.7 Bn, there is still no tax clarity as the treaties signed by India with Singapore and Mauritius changed past year", the report said.

The third major party in the e-commerce battle in India is Paytm, and now, their official reaction has come in.

On May 9, global retail giant Walmart Inc announced it was buying 77 per cent equity stake in the country's largest e-tailer Flipkart for $16 billion. While eCommerce is still a relatively small part of retail in India, we see great potential to grow. Online and offline are coming together, and there are many things to come. "However, such applicable long-term capital gains tax rate in India could be reduced by half, if such shares acquired after March 31, 2017, are sold before April 1, 2019", said Nangia & Co Director Chirag Nangia.

The transaction, apart from tax authorities, would be subject to clearance from Competition Commission of India and other regulators and will make India the biggest emerging market with US-based Amazon, China's Alibaba and Walmart pitted against each other.

Companies like Flipkart and Amazon operate as e-commerce marketplaces - a segment where 100 per cent foreign direct investment (FDI) is allowed.

Instead, the deal will enable Flipkart to solidify its presence as market leader, tapping further into India's blossoming e-commerce market.

The JV envisaged opening B2C stores, regulations permitting.

Walmart works on an wholesale cash-and-carry business model and now has 21 stores in the country. Today they have 21 "Best Price" stores across nine states.

A separate report on this matter estimates that there are over 2,000 employees, who own ESOPs across Flipkart, Myntra and Jabong. With deep pockets and years of expertise in retail grocery, Walmart's big bang-entry may deliver a knockout punch to some offline retailers or force consolidation.

Economic Times quoted a person in the know saying Biyani has already held early talks with Walmart and Amazon.

Some domestic retailers have also received a valuation boost from the Walmart deal. Shares of Future group companies and Aditya Birla Fashion & Retail rallied on Thursday and were also trading in green on Friday. It also announced that it will closely study the metrics of the deal and move to the Government or appropriate Authority to seek a ban on the deal till the time all related issues are resolved satisfactorily. Titan and Shoppers Stop have remained flat.

And by making this investment in Flipkart, Walmart played some indirect defence against Amazon, which was reportedly kicking the tires on a Flipkart acquisition, too. "We are actually excited about this development", Punit Lalbhai, ED at textile manufacturer Arvind.

Furthermore, in light of the Flipkart-Walmart deal, there are chances that Flipkart might introduce a wider range of products with Walmart's backing.

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