Ahead of selling a majority stake to a strategic investor, Flipkart has initiated the exercise to buy back shares from its minority shareholders by paying around $350 million to convert the company into a private limited one by reducing the number of shareholders, according to a document sourced from data intelligence platform Paper.VC. The move, sources said, will make it easier for any strategic investor as compliance burden for private limited companies are lesser in Singapore. Flipkart did not offer its comments till the time of going to the press.
Flipkart is registered in Singapore and analysts said that the regulations of that country automatically makes a company a public limited one if the number of shareholders exceed 50. To convert a company into a private limited one, the number of shareholders has to be brought below 50. Flipkart currently has around 145 entities as its shareholders.
In Singapore, compliances for a public limited company is tougher than those for private limited ones. As reported earlier, Walmart is in advanced stages of talks to buy a majority stake in Flipkart but its online rival Amazon has also reportedly entered the fray with a counter offer.
Tiger Global and SoftBank Group are the largest shareholders in Flipkart, each holding about 20% stake, followed by Naspers at about 13%. Sachin and Binny Bansal hold about 5% each in the company.