Japanese investment giant SoftBank is seriously mulling to invest $3 Bn in Indian e-commerce player Paytm Mall, according to key sources familiar with the matter. This investment would be in addition to the nearly $500 million investment that Softbank and Alibaba made in the Gurugram based startup earlier this year.
However, SoftBank will have to first make a complete exit from Flipkart before it heads with investment plan in Paytm Mall. This is because the Japanese conglomerate is bounded by a clause in the recent Walmart-Flipkart deal, which states that SoftBank cannot invest more than $500 million in Paytm Mall till 2020.
SoftBank’s exit from Flipkart hit by Tax twist
If sources are to be believed, SoftBank was all set to sell its entire stake in Flipkart in a bid to make a handsome return on its nearly $2.5 billion investment made last year. Even SoftBank’s Chairman Masayoshi Son had stated about the exit plan during investors call in Tokyo. But Japanese investment giant’s exit plan got hit by a tax twist, after it became clear that its profit from stake sale would be heavily taxed by the India government.
The tax twist threw SoftBank in a difficult spot, with the company still undecided whether it wants to sell stake in India’s largest e-commerce company.
Walmart, which now owns 77% stake in the Bengaluru based e-commerce behemoth, has said that it has no problem if Softbank decides to sell its entire stake.
Indian e-commerce market still has a room for third player
Most experts believe that the Indian e-commerce market is still big enough to accommodate a third player in the form of Paytm Mall. This may very well be the reason for SoftBank’s decision to take a big bet on the Gurgaon based startup.
Paytm Mall is relatively a new entrant in the e-commerce market but has managed to gain significant traction in very short span of time. The company has managed to fill the vacant space that was left after the fall of Snapdeal.
Some analysts also claim that instead of being a minor third player, Paytm Mall can give both Flipkart and Amazon a serious run for money. This claim is partly based on the fact that the Gurgaon headquartered startup has a solid fund backing from the Chinese e-commerce giant Alibaba.