Softbank may invest $3 billion in Paytm Mall

The $16 Flipkart Walmart deal was struck on 9 May

The $16 Flipkart Walmart deal was struck on 9 May

According to The Economic Times, the Japanese conglomerate has held early discussions to invest as much as $3 billion in Paytm Mall, run by Paytm E-commerce Pvt.

After conflicting news reports that Japan's SoftBank Group Corp may or may not sell its 20-22 percent stake in Flipkart to United States retailer Walmart Inc, comes the latest news reports claiming that the Internet giant will invest in Paytm Mall. Hence, even if it changes its mind, it is welcome to do so.

The I-T department now is going through the Section 9 (1) of the Income-Tax law, which deals with indirect transfer provisions, to see if the benefits under the bilateral tax treaties with countries like Singapore and Mauritius, could be available for foreign investors selling stakes to Walmart.

The Arkansas-headquartered company will also have the final word on the appointment or removal of the top executives at Flipkart and its group companies, PhonePe and eKart.

"Walmart wants to make sure that a higher price is not asked for at a later date by SoftBank", a person related to the deal said. He has announced the finalization of the deal between Flipkart and Walmart. However, these talks can only proceed if SoftBank finalises its exit from Flipkart. Walmart founder Sam Walton's grandson, Steuart Walton, is reportedly likely to join Flipkart's board of directors.

SoftBank owns 21 percent of the company.

Last week, American retail behemoth Walmart acquired 77 per cent stake in Flipkart for about Dollars 16 billion (over Rs 1 lakh crore) in the country's largest acquisition and the world's biggest purchase of an ecommerce firm. "Walmart will have the majority with or without SoftBank".

SoftBank is undecided on selling its Flipkart shares because of tax implications and also because it sees a further increase in valuation for Flipkart. Moodys said it expects the deal to initially weaken Walmarts credit metrics, with retained cash flow (RCF) to net debt ratio likely dropping to the low-30 per cent range from 40 per cent now and debt to EBITDA (earnings before interest, tax, depreciation and amortisation) ratio likely to double from 1.6 times now. "There will be more balance of power if SoftBank is there in the company", he said, asking not to be named as Walmart is a client of his company. However, the news came when SoftBank has not yet made a decision to part ways with Flipkart stakes due to tax obligations and is hopeful of a further increase in Flipkart valuation following the Dollars 16 billion deal with Walmart. As part of the agreement, Walmart will purchase new shares of Flipkart worth $2 billion and buy a stake worth $14 billion from the firm's existing investors. "Walmart could raise its shareholding by an additional 10-12%".

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