Japanese Internet & Telecom Giant, Softbank Records Jump of 49% in Operating Profit: Japanese Internet and Telecom Giant, Softbank Group Corp. has reported a 49% jump in its operating profit. These figures are the operating profit of the company acquired for the first quarter ending June 30, 2018. The hike in the figures is attributed to its sale of the stake in the Indian e-commerce giant Flipkart.
Softbank is supposed to have invested a huge amount of 2.5$ billion in the e-commerce site after it was acquired by yet another retailer giant Walmart in May. The bank contemplates to clock back an approximate return of $4 billion on its investment. This adds up to 60% boost against the actual initial value pumped into the Indian e-tailer Flipkart.
About the deal
It is the first public divestment by SoftBank’s Vision Fund, backed by a huge corpus of 100$ billion. SoftBank’s Vision Fund is a technology investment vehicle worth a value of $93 billion. It had also backed the e-tailer a year before. The company’s profit stood at $6.42 billion for the quarter of April to June which raised to $2.2 billion from $4.3 billion a year ago. The SoftBank led by Masayoshi Sons had agreed to sell 20 percent of its holding in the biggest Merger and Acquisition deal between two e-tailer giants Flipkart and Walmart, where the former was taken over by Walmart in May 2018. It had invested a total of $2.5 billion in the deal through its Vision Fund.
In addition to the sale of Flipkart stake, the company also saw a huge jump in its profits through the sale of its majority stake in ARM Holding’s Chinese operations, a chip designer company sold to local investors.
Merger and Acquisition deal between Flipkart and Walmart
Coming back to the biggest merger and acquisition deal which took place between Flipkart and Walmart in May 2018, is still waiting for further clearance and a green signal from the Indian authorities. The e-tailer giant Walmart is in the midst of getting a final regulatory nod on its transaction, in which it had acquired a 77 percent stake in Flipkart making it one of the biggest takeover of the present time. As per reports, the deal is currently scrutinized thoroughly by the Competition Commission of India (CCI), the Indian fair-play watchdog.
The company contemplates gaining a further jump in its profits from the investment. “We have estimated the sale of Flipkart sales in the coming 24 months. On inception of the investment the company has calculated a deferred tax at the right of 43.68 percent, which is contemplated as the Indian short-term capital gains tax expected after applying for the sale of Flipkart shares,” stated SoftBank on Monday. As per the firm, the total amount of tax could value up to around $644 million which when converted into Japanese yen amounts to 71,746 million yen.
With the current jump in the total profit, it is yet to see whether the Japanese Internet and Telecom Giant SoftBank will leapfrog their investment in the Indian market.