SoftBank opposes early cash out: Walmart multi Bn deal in Flipkart hits snag

Soon after the US retailer Walmart has reportedly shown interest to buy a larger stake in India e-tailer Flipkart, it has hit a roadblock in face of Softbank.

Japan's investment group, which has already invested around $2.5 billion in Flipkart, is opposed to Flipkart buyout deal with Walmart.

“SoftBank is not willing to cash out this early as they see themselves as a long-term investor in Flipkart,” a source privy to the matter was quoted as saying in a Mint report.

Meanwhile, the talks are in the early stages and the companies haven’t taken any final decision.

At present, SoftBank owns 23.62 per cent stake in the company while Tiger Global holds 22.44 per cent of preference share capital.

The development comes a day after the retail giant Walmart, expressed a strong interest to invest over $5 billion for about 40 per cent stake in the Bengaluru-based company. The US-headquartered retail major plans to acquire primary as well as secondary shares in Flipkart.

For Walmart, the deal would give a strong foothold in India and Flipkart much-needed muscle in its fight against long rival Amazon, which has made $5 billion investment commitment in India.

For years, Walmart has tried to enter India but has remained confined to an offline wholesale business amid tough restrictions on foreign investment.

Currently, the retailer operates 21 stores in India. Besides, it has also signed 20 new sites for upcoming stores.

To command more market share than Amazon in a fledgling digital economy, Walmart is likely to cut cheque on an even 2X valuation of the last round concluded about 6 months ago. If this deal, goes through, would be one of the largest cross-border deals in India.

The report outlined that probable investment in Flipkart will value the Kalyan Krishnamurthy-led company in the range of $20-23 billion. Meanwhile, Walmart is reportedly eyeing for about 40 per cent stake.

The Doug McMillon-led retail giant will have to inject $8 to 9 billion for the aforementioned stake.

To counter local rival (Amazon in the US), Walmart had bought US-based online retailer Jet.com for a whopping $3 billion. Last month it also teamed up with Rakuten Inc to fight Amazon’s grocery play in Japan.

Whereas Amazon in India has emerged as strong competitor to local leader (Flipkart). In December last year, Amazon had claimed that it left local rival Flipkart behind to become the leader in online retail space.

Amazon, ever since its arrival in India in 2013, has not shown sign of hurriedness. It claims to believe in building a loyal customer base more than anything else. The firm boasts of its annual subscription services Prime and it’s selling like hot cakes. The company claimed that India added the largest number of prime customers across the globe.

Both companies often claimed to outrun each other. Though according to industry analysts and reports, Flipkart has done more business and sales than Amazon India. Amazon’s gross sales are reported to around 20 percent lower than Flipkart’s annual run rate of about $7 billion.

Google has also offered to invest in the e-commerce firm at a valuation of $15-$16 billion, added the report.