WS Retail’s Logistics Division Has Been Bought Back By Flipkart
In this article (7)
Flipkart Ltd., the parent company of India’s homegrown ecommerce portal Flipkart.com, which is based in Singapore, has bought back the shares of their logistics business from WS Retail. Business analysts are predicting that this move has been made keeping in mind their IPO launch, which can happen somewhere between 2016 and 2017.
This acquisition has been made via Instakart Services Pvt Ltd., a new entity which was formed in June, 2015. This new entity’s directors are Ankit Nagori (Chief Business Officer at Flipkart) and Rajnish Singh Baweja (Flipkart’s Finance Controller). It is not yet clear how much money has been traded in this acquisition, and Flipkart has refused to share more details.
One spokesperson from Flipkart said, “We, as a policy, do not comment on specific transactions.”
Flipkart’s IPO Plans
By purchasing the logistics arm of WS Retail, a company which is again, a part of Flipkart Ltd., the management is trying to simplify the company structure and make it more presentable for public listing scrutiny in near future.
In May this year, Flipkart Chief Financial Officer Sanjay Baweja said that Flipkart is not looking for IPO for the next couple of years, as they are not ready with the strict regulations and scrutiny which comes with it.
Sanjay had said, “We are still at a stage where we do not want to stand scrutiny on a quarterly basis. We would rather keep ourselves private for as long as we can and then we will see what lies ahead.”
Considering that Flipkart is headquartered in Singapore, an Indian listing is not possible. As per insider sources, Flipkart is aiming for a listing at New York based NASDAQ, which is world’s second largest stock market.
“We, as a policy, do not comment on specific transactions.”
Flipkart’s Complex Company Structure
As per various speculations, WS Retail will be closed down in the next few years, as Flipkart will convert fully into a marketplace and advertisement based business model, ditching inventory based model.
WS Retail was actually created to get around the strict FDI rules in India. WS Retail was formed in 2009, as a seller on Flipkart’s own platform.
Technically, WS Retail buys the products from Flipkart India Pvt. Ltd., and sells to Indian customers. Flipkart India Pvt. Ltd. is the B2B division of Flipkart Ltd. And as FDI is allowed in B2B ecommerce, but not in B2C; this arrangement made sense to the tax collector.
However, In 2013, Flipkart sold WS Retail to a group of investors led by former OnMobile Chief Operating Officer Rajiv Kuchhal. This was done to comply with other FDI norms in India, as a special investigation had started to look into the tax issues inside the company.
Buying back the logistics arm from WS Retail is just the start of a new restructuring process, specially aimed for the IPO listing or so we think…
We will keep you updated as more details come in.
“WS Retail’s Logistics Division Has Been Bought Back By Flipkart Ltd; Is It Preparation For IPO Launch?”,
Questions & Answers
Q.What is the new entity through which Flipkart made this acquisition?
What is the new entity through which Flipkart made this acquisition?
Flipkart made this acquisition via Instakart Services Pvt Ltd., a new entity formed in June 2015. Its directors are Ankit Nagori and Rajnish Singh Baweja, who hold positions at Flipkart.
Q.Why did Flipkart sell WS Retail in 2013?
Why did Flipkart sell WS Retail in 2013?
Flipkart sold WS Retail in 2013 to comply with other FDI norms in India. This move occurred after a special investigation began looking into tax issues within the company.
Q.Which stock market is Flipkart reportedly aiming for a listing?
Which stock market is Flipkart reportedly aiming for a listing?
As per insider sources, Flipkart is reportedly aiming for a listing on the NASDAQ in New York. This is the world's second-largest stock market, but an Indian listing is not possible as Flipkart is headquartered in Singapore.
Q.What is the primary reason business analysts are predicting for this move?
What is the primary reason business analysts are predicting for this move?
Business analysts are predicting this move has been made with Flipkart's IPO launch in mind. This acquisition simplifies the company structure, making it more presentable for public listing scrutiny.
Reader pulse
Is Flipkart's logistics buyback a smart move?
17,135 votes so far