Flipkart turns itself into a private firm ahead of Walmart deal
07 May 2018
Indian ecommerce major Flipkart Ltd has turned into a private company from a holding firm, ostensibly for a strategic buyout soon by the world's largest retail giant Walmart Inc, according to documents it filed for regulatory approvals.
"Documents filed by Flipkart with the Singapore's Accounting and Corporate Regulatory Authority (ACRA) indicate that the holding company has become a private firm — Flipkart Pte Ltd — in Singapore where it is registered," business intelligence platform Paper.vc Founder Vivek Durai told IANS on Friday.Meanwhile, another report in the Mint says SoftBank Group Corp is considering ways to sell its stake in Flipkart without attracting a hefty tax liability, as Flipkart nears a deal to sell a majority stake to Walmart.
Citing sources familiar with the matter, the report says SoftBank is expected to decide on its stake sale over the next week after consulting with tax experts. It still hasn’t decided how much of its 20-21 per cent holding in Singapore-registered Flipkart it will sell and when. SoftBank may retain the whole of its stake for at least one year more to avoid paying a large tax, the Mint’s sources said.
In a regulatory filing with ACRA on Thursday, Bengaluru-based Flipkart said it concluded a second buyback of shares from a set of its investors for $350.46 million in a transaction that closed on 27 April.
"The buyback and the subsequent conversion to private company status appear to be part of a series of steps aimed at easing a proposed acquisition by Walmart," Durai told IANS in Chennai.
Though the buyback was on 27 April, Flipkart filed the documents on 3 May. It has obviously paid from the $2.5-billion funds it raised from Soft Bank Vision Fund, Microsoft, eBay and other investors last year.
Flipkart purchased 1,895,574 redeemable preference shares and 174,319 non-redeemable preference shares for $350.46 million from a set of investors in a transaction that closed on 27 April.
The decade-old firm's first buyback of shares was on 7 December, 2017 when it spent $869.15 million to buy 72,83,175 redeemable preference shares and 23,01,456 non-redeemable preference shares at $85.3 per share.
"As the company needs to have 50 shareholders to become a private entity, 94 of the 144 shareholders would have exited in the twin buyback rounds, while the remaining would have partially (15-50 per cent) sold their equity stake," said Durai.
According to another analyst who declined to be named, Flipkart has converted into a private firm so that Walmart could come on board as a strategic investor for controlling stake after the exit of so many institutional and individual investors, says the IANS report.
"Flipkart, which raised $6.11 billion in 18 rounds of funding since 2009 and bought back over 26 lakh shares worth $1,320 million ($1.32 billion) places its valuation at $17.69 billion," said Durai.
The valuation is based on the buyback price the holding firm paid to investors, including premium. With institutional investors holding majority of the combined stake, ranging between 20.79 percent (highest) by SoftBank and 6.11 per cent by eBay (lowest), the share of co-founders Sachin Bansal and Binny Bansal is 5.5 per cent and 5.25 per cent.
According to the filings, the company also bought shares from its present and former employees on 13 December 2017 for $100 million that were given as stock options. Of the major institutional investors and venture partners, besides Soft Bank, Tiger Global has 20.55 per cent stake, Nasper 12.83 per cent, Accel Partners 6.44 per cent and Tencent 5.69 per cent, with others holding the rest.