Indian Stock Market Tips|SoftBank posts 60% gain on Flipkart bet, sets aside $650 million STCG tax
SoftBank reported a 49% increase in its operating profit $6.45 billion for the first quarter
Masayoshi Son-led Japanese conglomerate SoftBank on Monday showed a gain of ¥ 164.25 billion (around $1.48 billion) on its balance sheet owing to an increase in the fair value of its stake in Flipkart, translating to 60 per cent return on its last year’s investment in the e-commerce firm. This comes ahead of the closure of the deal that will see SoftBank selling its entire 19.95 percent stake in Flipkart for around $4 billion to Walmart.
Not only that, SoftBank has also set aside ¥71.75 billion (around $648 million) in taxes to be paid as short-term capital gains to the Indian government, representing 43.68 percent of its total gain from the Flipkart exit, as the sale would happen within 24 months of its initial investment in the company. SoftBank had invested $2.5 billion in the Bengaluru-headquartered company in August 2017.
SoftBank, which entered into a deal with Walmart on May 9 to sell its stake in Flipkart, did not, however, give any clarity on when the transaction would be closed. Walmart is investing $16 billion in Flipkart for a 77 percent stake.
“The increase in the fair value of Flipkart was recognised to reflect the expected sales value of approximately $4 billion pursuant to the agreement SoftBank Vision Fund entered into on May 9, 2018, to sell all of its shares to Walmart,” Softbank said in its consolidated financial report for the quarter ended June 30.
SoftBank reported a 49 percent increase in its operating profit ¥715 billion ($6.45 billion) for the first quarter, compared to a profit of ¥479 billion ($4.32 billion) in the corresponding quarter last year. Of this, the SoftBank Vision Fund reported an operating profit of ¥245 billion ($2.21 billion) largely driven by the increase in Flipkart’s valuation.
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