Flipkart deal killer? This is why Softbank does not want to sell its stake to Walmart

May 11, 2018, 05:14 PM IST

Flipkart deal killer or a demand for more? SoftBank's Masayoshi Son may have put a hurdle on Flipkart-Walmart deal. SoftBank Group Corp will reportedly take a call in the next 7-10 days on whether to exit Flipkart or stay invested for some more time. Till now it was believed that Softbank had agreed to sell its stake to Walmart, but now too many doubts have surfaced. Here is why Masayoshi may well kill the deal:


Walmart's statement on Wednesday implied SoftBank had agreed to sell its 20-22 per cent Flipkart stake. However, this is no longer the case, reports PTI.


The factors that hold key to the decision include the whopping tax SoftBank may have to pay on profits it would earn from Flipkart share sale in India.


SoftBank had invested $2.5 billion in Flipkart and exiting the company would fetch it up to $4.5 billion. The $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, Flipkart share sale would attract a long-term capital gains tax of 20 per cent plus surcharge and education cess. The taxes will effectively wipe away a fourth of the profit of SoftBank.


Other deciding factors on Flipkart deal would be Son's relationship with Walmart and that SoftBank likes to be a long-term investor.  Softbank is very bullish on India and sees immense opportunities for growth of investment.


In case SoftBank decides not to sell, Walmart would be left with about 55 per cent of Flipkart.