Walmart may put $ 3 billion more in Flipkart, take over 85% stake

Walmart may put $ 3 billion more in Flipkart, take over 85% stake

USA retail giant Walmart has an option to invest an additional $3 billion in India's largest online retailer Flipkart at the same valuation within a year of completing the acquisition of 77% stake in the company, according to the company's regulatory filings with the United States market regulator, the Securities and Exchange Commission.

These veto rights for the minority shareholders will expire if Walmart owns 85 per cent of the outstanding shares of Flipkart.

"In addition, holders of 60 per cent of the Flipkart shares held by the minority shareholders, acting together, may exercise veto rights to prevent certain significant transactions or other events involving Flipkart", it added. As TOI reported on May 12, Walmart and Soft-Bank are in talks to decide on a time to execute the share transaction at a predetermined price.

SoftBank had invested United States dollars 2.5 billion in Flipkart and exiting the company would fetch it up to USD 4.5 billion.

The filing also said the IPO would be done at no less a valuation than the deal price for the e-commerce firm. For now, ex-Tiger Global executive, Kalyan Krishnamurthy, who steered Flipkart's turnaround since he returned to the e-tailer in middle of 2016, has been retained as the CEO.

More news: Hawks hire Lloyd Pierce as new head coach on three-year deal

But Japans SoftBank has not yet chose to sell its 20-22 per cent stake in Flipkart to Walmart, sources with direct knowledge of the development said. Sources said both Krishnamurthy and Bansal have a two-year lock-in.

Interestingly, Walmart also has the right to appoint or replace the Chief executive or other principal executives of the Flipkart group of companies, subject to consultation rights of the Flipkart board and the founder Binny Bansal. According to the filing, the Flipkart board will initially have eight directors, five of which would be appointed by Walmart.

Moreover, Bentonville, Arkansas-based U.S. retailer said in the filing that it has the right to appoint or change chief executive or other principal executives of the country's largest e-commerce company.

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.

Walmart also mentioned no celebration would be responsible to pay a termination fee if a share issuance or invest in arrangement with Flipkart were also terminated. SoftBank's Masayoshi Son will take a call in the next 7-10 days on whether to exit India's biggest online retailer or stay invested for some more time, they said.