Flipkart’s Snapdeal buy to face regulatory hurdle
As Flipkart's holding company is based in Singapore, it will have to ensure that the acquisition does not violate India's foreign exchange rules
The much anticipated acquisition in India’s booming e-commerce sector of Flipkart taking over beleaguered Snapdeal may run into various regulatory hurdles as the holding company of the former is domiciled in Singapore.
Flipkart Pvt Ltd, Singapore, operates its e-commerce platform in India through its wholly-owned subsidiary Flipkart Internet Pvt Ltd.
Hence it will have to deal with Reserve Bank of India’s (RBI) rules on foreign exchange and the deal may have to be specially structured to protect the interest of Snapdeal shareholders, reports Economic Times.
Flipkart will have to make sure that the acquisition does not violate rules under the Foreign Exchange Management Act.
In the proposed all-stock deal, estimated at US $700 million-1 billion, shareholders of Snapdeal would receive Flipkart stock. But issuance of shares by Flipkart Singapore to Indian shareholders of Snapdeal would need a specific permission from RBI, the daily added.
Snapdeal’s largest shareholder is Japan’s SoftBank Group and other prominent investors include Ratan Tata, PremjiInvest, the personal investment arm of Wipro Chairman Azim Premji, China’s Alibaba Group and Foxconn Technology Solutions among others.