Following the announcement, it affirmed Walmart's Aa2 rating and stable outlook. This investment, according to an ET report is subject to Softbank being freed from a restrictive clause that does not allow it to invest over $500 million in Paytm Mall, until 2020.
"There is likely to be capital gains withholding tax implications when the shares of Flipkart Singapore are sold by Softbank or other foreign investors".
Another of Walmart's minority shareholders, very notably, is SoftBank, whose CEO, Masayoshi Son, preempted Walmart itself by announcing the deal to reporters and analysts last Monday while discussing SoftBank's quarterly results.
The department now is going through section 9 (1) of the income tax law, which deals with indirect transfer provisions, to see if the benefits under the bilateral tax treaties with countries like Singapore and Mauritius could be available for foreign investors selling stakes to Walmart, the TOI report said. Now with Walmart as an investor, Flipkart will be able to leverage the USA giant's grocery and general merchandise supply-chain knowledge to build this category, something which Flipkart has piloted in Bengaluru but has not been able to scale up significantly.
When contacted, a SoftBank spokesperson declined to comment.
Based on SoftBank's earlier agreement, Walmart has already informed the Securities and Exchange Commission (SEC) about acquiring an about 77% stake in Flipkart.More news: Pep Guardiola hails flawless end to record-breaking season
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However, if SoftBank decides to stay invested in the Bengaluru-based company, it will help bring checks and balances.
On May 12, Tamil Nadu Vanigar Sangankalin Peramaippu, a federation of traders in Tamil Nadu, warned the government of massive country-wide protests if the deal between Walmart-Flipkart was approved. "Walmart will have the majority with or without SoftBank".
Walmart has told Flipkart's leadership team to not worry about an IPO anytime soon, according to two people familiar with the matter.
Sources said Walmart had indeed courted SoftBank for buying its shares but the Japanese group has not yet taken a final call on the issue.
Global rating agency Moody's believes e-commerce firm Flipkart will continue to make losses for the next few years, even as it said that the $16 billion Walmart-Flipkart deal is "credit positive" for Walmart. "There will be more balance of power if SoftBank is there in the company", he said, asking not to be named as Walmart is a client of his company. The bank has not made a decision to sell its stake to Walmart.