Flipkart bought back shares worth Rs 2,300 crore (around $350 million) from several minority investors, including Valic Company, Macquarie Group’s Optimum Fund, T. Rowe Price, as the homegrown e-commerce giant plans to sell a majority stake to Walmart Inc.
The country’s largest online retailer bought back about 1.89 million shares, amounting to 60 percent stake, from minority investors in a transaction that values Flipkart at $17.9 billion, according to documents filed with Singapore’s Accounting and Corporate Regulatory Authority and sourced from data intelligence platform Paper.VC.
The buyback was done to meet the requirements to become a private company and to evade excessive compliance in the run-up to a proposed deal with Walmart. The U.S. retail giant is looking to buy a majority stake or about 60-80 percent in Flipkart for at least $12 billion, according to a Bloomberg report citing people familiar with the matter.
Some of the individual investors who have sold their shareholdings in Flipkart completely include Accel’s Shekhar Kirani and SoftBank Managing Director Deep Nishar.
A large number of funds and other investors like IDG Ventures, TR Capital, and others have either completely or partially exited from Flipkart.
According to regulations in Singapore, if the number of shareholders in an entity is above 50, it becomes a public company and the compliance to deal with is much higher as compared with a private company. Post the buyback, Flipkart will have about 49 investors down from around 145.
SoftBank and Tiger Global, currently largest shareholders in Flipkart with about 20.8 percent and 20.6 percent stake, respectively, did not participate in the share buyback programme. Other large investors — Naspers, Microsoft, eBay, and Accel—also did not participate in the buyback.
Tiger Global Management will sell nearly all its stake in Flipkart in the Walmart deal, while SoftBank Group Corp. will offload a substantial part of the holding, the Bloomberg report quoted above had added.
Flipkart was last valued at about $12.5 billion when it raised $2.5 billion from Masayoshi Son’s SoftBank Vision Fund in August 2017. That was much lower than its $15.2-billion valuation in 2015 as the company raised $700 million from investors, including Tiger Global and Steadview Capital.