ETtech Morning briefing: Catch in Flipkart's ESOPs plan, More mobile discounts soon & more

The catch in Flipkart's employee ESOP plan

What's the news?

Current Flipkart employees may be allowed to liquidate 50% of their vested Esops during the first year, with former employees being allowed only 30% of their vested Esops, according to sources familiar with the matter.

Further, Current employees will have the chance of cashing out 25% each in the second and third year, but the former employees would have to wait it out till the company goes public.

Why is this happening?

“(Flipkart) doesn’t have money to buy 100% of everyone’s stock options, they need to retain some of the money for growth,” said an industry source, requesting not to be named.

Flipkart has set aside $500 million to repurchase employee stock options as a result of Walmart buying $77% stake in Flipkart through a $16 billion investment.

Experts in the space believe that while former employees may not be pleased with this, it is usually not the norm for companies to allow employees to hold Esops once they leave the organisation.

More discounts on mobile phones soon?

What's the news?

Indian consumers can look forward to more discounts on mobile phones with a stronger Walmart-Flipkart entity and deeply pocketed Amazon set for an intense fight for a greater share of the devices pie.

What's the plan?

Walmart will also bring in immense offline organised retail expertise, which will help Flipkart create a complementary online-offline business which in turn can help handset brands expand the market by going into the smallest towns and cities.

Mobile phones are among the largest revenue generators for both Flipkart and Amazon, due to which they are rolling out incentives such as no-cost EMIs, interest-free schemes and exchange programmes.

Walmart can approach IT authorities to determine tax liability

What's the news?

India's income tax department had told Walmart that it can approach the authorities under Section 195 (2) of the Income Tax Act to determine the withholding tax liability on its proposed purchase of a 77% stake in Flipkart for $16 billion.

What is Income Tax Department doing?

The income tax department has sought details of the deal that Walmart announced on Wednesday. The department has told Walmart that it believes that it may have withholding tax liability under the law on payments made to non-resident investors in the Indian ecommerce company.

“Treaty provisions will not apply on indirect transfers that have Indian assets as underlying,” said another official, referring to double taxation avoidance agreements, in this case, the one between India and Singapore.

Walmart to appoint 3 members to Flipkart board

What's the news?

Steuart Walton, grandson of Walmart founder Sam Walton, Judith McKenna, president at Walmart International, and Dirk Van den Berghe, regional CEO of Walmart Canada and Asia, will join the Flipkart board, following Walmart's proposed acquisition of Flipkart.

Who else is on the board?

Flipkart co-founder Binny Bansal and Flipkart CEO Kalyan Krishnamurthy will also be part of the board while the other co-founder, Sachin Bansal, has sold off his 5.5% stake in Flipkart for about $1 billion and exited the company. According to sources, Walmart had categorically said that it could only accommodate one of the founders in the board.

Walmart to step up India sourcing with Flipkart acquisition

What's the news?

Walmart will likely step up sourcing from India for its global operations as the Flipkart acquisition gives it access to the huge supplier base of the e-commerce company.

What is Walmart's plan?

Walmart said it would support small business and ‘Make in India’ through direct procurement as well as provide increased opportunities for exports through global sourcing and e-commerce. Walmart is also looking to consolidate its India operations in Bengaluru where Flipkart is currently based.