India’s largest e-commerce firm
Flipkart Ltd has bought backs its logistics business from WS Retail Services
Pvt. Ltd., the largest seller on its platform, and a company with which it has
close links, in an effort to simplify its structure ahead of a possible share
sale a few years later.
The acquisition has been made
through a new entity called Instakart Services Pvt. Ltd. The deal leaves WS
Retail with only a trading business, which is also gradually being wound down
as Flipkart shifts to a market place model from an inventory led one. Flipkart
wanted to buy back the logistic arm as it is preparing for an IPO over the next
few years and wants to make its complex structure simpler.
Deal was at fair value to prove arm’s
length distance was maintained between Flipkart and WS Retail. Since Flipkart
logistics arm was moved to WS Retail in 2012, the business would have
significantly increased in value. Since India bans FDI in online retail,
Flipkart has devised a complicated maze of many inter-connected and some
purportedly independent entities that receive the massive amounts of money it
raises to build an integrated e-commerce business.
WS Retail is one of the most
important entities in this structure. To get around FDI rules, Flipkart created
WS Retail in 2009 as a seller on its site. As part of a complex arrangement, WS
Retail bought goods from Flipkart India Pvt. Ltd, the B2B arm of the main group
holding company and sold the same goods to customers on Flipkart site. WS
Retail also owned and ran Flipkart key logistics business called e-kart that delivered
products to customers.
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