Tokyo-based SoftBank is evaluating option to pump in about Dollars 3 billion (about 20,000 crore) in Paytm Mall even as it has not yet finalised selling its stake in rival homegrown ecommerce major Flipkart to Walmart, reports the Economic Times citing two people aware of the matter.
The tax department will seek details of share purchase agreement from Flipkart on the $16-billion stake purchase by US retail giant Walmart to assess the tax liability and also to find out whether the General Anti Avoidance Rules (GAAR) provisions can be invoked, an official said.
Indian e-commerce industry has since grown steadily - US$30 billion in size - and analysts expect this to shoot up to US$200 billion by 2026.
In addition, within the first year of the closing of the deal, Walmart may infuse another $3 billion into Flipkart.
Retailers such as Walmart and Amazon are looking for growth in the burgeoning middle class markets in Asia.
Speaking about PayTM mall, the online marketplace, which primarily on its online-to-offline (O2O) model, had a market share of about 5.6% in 2017, its first full year of operations, with gross merchandise volume, or gross sales, of about $1 billion, according to Forrester Research.
"Amazon already has a substantial foothold in India at 27% market share, and Walmart knew they needed to get into that market either by acquiring Flipkart or taking market share away", said Neiweem. Although India allows foreign direct investment in e-commerce, at least two trade bodies in the country have already voiced opposition to Walmart's latest move. Walmart also revealed that it may name or replace the CEO and other executives at Flipkart. But Flipkart's board reportedly believed a deal with Walmart had a better of chance of passing regulatory muster.
Minority shareholders after the deal include co-founder Binny Bansal, China's Tencent Holdings 0700.HK , U.S. hedge fund Tiger Global Management and Microsoft Corp MSFT.O .
"In the Walmart-Flipkart deal, Section 9 (1) will apply as the assets of Flipkart Singapore are substantially based in India and hence the sellers would be liable to pay capital gains tax", Titus and Company Managing Partner Diljeet Titus opined.
"When we raised protest against the Walmart plan to set up shops in Tamil Nadu during the Jayalalithaa regime, she ensured that Walmart was not permitted to do business in the state and thereby protected our business interests".