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From 'holding' firm, Flipkart turns into 'private' firm for buyout by Walmart

Flipkart, in a regulatory filing, informed ACRA that it concluded a second buyback of shares from a set of its investors for $350.46 million in a transaction that closed on April 27.

Edited by: India TV Business Desk, Bengaluru [ Published on: May 04, 2018 23:28 IST ]
Image Source : PTI

India's e-tailer major Flipkart

The documents filed by Flipkart for regulatory approvals reveal that India's e-tailer major 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. 

"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," news agency IANS quoted business intelligence platform Paper.vc Founder Vivek Durai as saying.

Flipkart, in a regulatory filing, informed ACRA that  it concluded a second buyback of shares from a set of its investors for $350.46 million in a transaction that closed on April 27.

"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," IANS quoted  Chennai-based Durai as saying.

Though the buyback was on April 27, Flipkart filed the documents on May 3. It has obviously paid from the $2.5-billion funds it raised from Soft Bank Vision Fund, Microsoft, E-Bay and other investors last year.

"The buyback will enable the e-commerce giant to bargain for a favourable deal with the US-based Walmart, which is eyeing a majority or controlling equity stake in it to foray into the multi-billion-dollar Indian retail space," a market analyst told IANS earlier.

The e-commerce major purchased 18,95,574 redeemable preference shares and 1,74,319 non-redeemable preference shares for $350.46 million from a set of investors in a transaction that closed on April 27.

The decade-old firm's first buyback of shares was on December 7, 2017 when it spent a whopping $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," hinted 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.

"The deal between Flipkart and Walmart is a done thing, as evident from the exit of majority of its investors. There is no reason otherwise for it to turn into a private firm after being a holding company over a decade," hinted the analyst.

"Walmart has been losing ground to Amazon in their traditional US market, while Flipkart in India has managed to maintain its lead, albeit slender, over Amazon. It's not surprising that Walmart wants to take over Flipkart, which has built an exceptional engineering talent at many levels of operations," affirmed Durai.

"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 per cent (highest) by Soft Bank and 6.11 per cent by E-Bay (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 December 13, 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 among others.

(With IANS inputs)

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