'Walmart can infuse $3 bn in Flipkart'

Walmart has a lot riding on Flipkart

Walmart has a lot riding on Flipkart

U.S. retailer Walmart has the option to get additional Dollars 3 billion investments into Flipkart within a year of completing about USD 16 billion deal and may get India's largest online retailer listed in as early as four years, as per a regulatory filing.

Earlier this week, Walmart announced that it would buy 77% stake in Flipkart for $16 billion at a valuation of almost $21 billion. Minority shareholders holding 60% of Flipkart's shares "acting together, may require Flipkart to effect an initial public offering following the fourth anniversary of the closing of the transactions", said the retailer.

The filing said that the IPO must not be done below the value which Walmart invested in the Indian e-commerce firm. Walmart announced earlier this week that it will pay $16 billion for a roughly 77% stake in Flipkart in what is the U.S. retail giant's largest-ever deal and a move to take on arch rival Amazon.com Inc.in a key growth market.

Amazon also has big plans for growing the grocery segment of its business in India, expecting groceries and household products to make up more than half of its business in the country in the next five years.

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This included $14 billion earmarked for purchasing shares from existing shareholders and fresh capital infusion of $2 billion in Flipkart.

Walmart said on Wednesday it and Flipkart were in talks with other investors to potentially take part in a funding round.

The deal, the biggest ever acquisition for Walmart, had valued Flipkart for more than $20 billion, according to sources.

Following the acquisition, the Flipkart board will initially have eight directors with five being appointed by Walmart, two being appointed by certain minority shareholders and one Flipkart founder (Binny Bansal). In fact, the Beast of Bentonville had also said that it hoped to meld Flipkart's numbers into the revenues of Walmart's global operations by the end of the second quarter and had suggested that might impact the company's earnings per share by up to 30 United States cents.

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The filing also says that there are no termination fees linked with the transaction. Flipkart board will have eight directors, down from ten. But two of the directors appointed by the USA retailer would not be affiliated with Walmart for the next two years.

Meanwhile, sources with direct knowledge of the development said that Japan's SoftBank has not yet made a decision to sell its 20-22 per cent stake in Flipkart to Walmart.

If Walmart transfers a sufficient number of Flipkart shares which gives rise to a situation that it no longer controls a majority of the Flipkart shares, then each minority shareholder will also be entitled to transfer all of its holding to the proposed buyer of Walmart's holding.

It said among other transfer restrictions and subject to certain exceptions, transfers of Flipkart shares will be subject to a right of first refusal exercisable by Walmart and other significant minority shareholders, and in certain situations, co-sale rights.

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