In an unexpected development of events, The Economic Times, on Friday, has reported that Softbank Group Corp’s, Chief Executive Officer, Masayoshi Son, is still not decided whether to sell its 21% stake in India’s largest online retailer Flipkart, according to two sources familiar with the situation.

The report said the Japanese conglomerate is still figuring out the tax liability that would arise if it sold its shares less than a year after investing in Flipkart,

Further, it sees a significant upside potential in Flipkart, which has been valued at about $22 billion in the transaction, according to the two people.

Earlier, Walmart Inc has announced acquisition of 77% stake in Flipkart for about $16 billion in the largest e-commerce deal which will give the US retailer access to the Indian online market that is estimated to grow to $200 billion within a decade.

Read also: Walmart-Flipkart deal will have a positive impact on India's FDI, says NITI Aayog

The 77% stake in Flipkart includes SoftBank’s stake in the company. But the Japanese conglomerate is still weighing its options, the report said.

“As of now, SoftBank has not exited Flipkart. It will take a call on the exit in the next 10 days,” said one of the sources mentioned above. “Son is a big believer in India and thinks that the valuation of the company (Flipkart) can go up further.”

SoftBank is supporting Walmart’s acquisition of a controlling stake in Flipkart, said one of the people cited.

Read also: Flipkart now in Walmart’s cart: What this means for Indian e-commerce space

“This (the deal) happened quickly. Discussions are on with Walmart to help them facilitate the closing of the transaction and determine SoftBank’s role in the company going forward,” according to this person.

“The situation is still very fluid,” said another source familiar with the development. “Soft-Bank’s fund is registered in Jersey and they are suffering a huge tax liability because there is no DTAA protection with Jersey.”

Signed between India and other countries, a Double Taxation Avoidance Agreement (DTAA) ensures investors don’t end up paying taxes on income earned from the source country and also the country of residence. To avoid the short-term taxation issue, SoftBank may hold the Flipkart stake for 6-12 months, said the source mentioned above.

Read our comprehensive coverage of the deal here.

First Published:May 11, 2018 11:51 AM IST