Walmart is now planning to use USD 1.2 billion of cash and cash equivalents lying in its reserve for funding Flipkart’s operation.
Walmart’s total cash and cash equivalents were USD 9.3 billion in April 30, 2019. But in a document filed with the US Security Exchange Commission (SEC), the US-based retail giant said, “As of April 30, 2019 and January 31, 2019, cash and cash equivalents of USD 2.7 billion and USD 2.8 billion, respectively, may not be freely transferable to the US due to local laws or other restrictions. Of the USD 2.7 billion at April 30, 2019, approximately USD 1.2 billion can only be accessed through dividends or inter-company financing arrangements subject to approval by Flipkart minority shareholders. However, this cash is expected to be utilised to fund the operations of Flipkart.”
Details of the structure of financial transaction is still unknown, and Flipkart incurred a loss of Rs 46,901 crore on an increased revenue of Rs 30,164 crore for the financial year 2018.
While India doesn’t allow loss-making companies to issue dividends, the financial structure of this transaction will most likely be through intricate inter-company financing arrangements.
When Walmart acquired the majority stake in Flipkart, it valued the company at about USD 24 billion, which comprised primarily of USD 2.2 billion in cash and cash equivalents, USD 2.8 billion in other current assets, USD 5.0 billion in intangible assets, and USD 13.5 billion in goodwill.
The company also had liabilities of USD 3.7 billion, which comprised primarily of USD 1.8 billion of current liabilities and USD 1.8 billion of deferred income taxes.
Walmart’s total revenues for the three months ending April quarter of FY20 increased by USD 1.2 billion to USD 123.9 billion, compared to the same period in the previous fiscal year. The company stated, “The increase in revenues was due to an increase in net sales, which was primarily due to overall positive comparable sales for the Walmart US and Sam’s Club segments, the addition of Flipkart’s net sales, and positive comparable sales in the majority of our International markets.”
These increases were partially offset by a $1.8 billion negative impact of fluctuations in currency exchange rates and its sale of the majority stake in Walmart Brazil, the company said.―Your Story