How CA’s have very smartly created the Organisational Structure of Flipkart
Binny (left) and Sachin Bansal have become the poster boys of India’s e-commerce business and the envy of the larger corporate world.
Flipkart has devised a complicated maze of inter-connected and purportedly independent entities that receive massive amounts of money it raises to build an integrated e-commerce business.
After our First Article ‘Flipkart all you need to know’ was loved by all, we to posted ‘Why Flipkart was registered in Singapore’ which also was loved and shared by you all. In both the cases we mentioned that we will be discussing the taxation part of Flipkart. But as we were researching on the same, we wanted to first know the structure of Flipkart.
So, what’s the company’s corporate structure.
Since India bans foreign direct investment (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.
This is in short what Flipkart does:
a. It sources goods from manufacturers, sells those goods to many of its third-party sellers who then, in turn, offer those products to shoppers. Flipkart provides the technology platform and logistics services and takes a commission on every sale on its site.
b. This isn’t how a pure marketplace—Flipkart claims to be one—operates. Which is why Flipkart has had to set up a complex web of at least nine entities.
c. Today, after nearly six rounds of investments from more than 15 investors and several acquisitions, Flipkart’s corporate structure would make older Indian conglomerates proud. Most of Flipkart’s entities finally lead to the ultimate holding entity, Flipkart Pvt. Ltd (FPL), which was set up in October 2011 in Singapore.
d. There are three entities registered in Singapore as 100% subsidiaries of FPL: Flipkart Marketplace Pvt. Ltd, Flipkart Logistics Pvt. Ltd and Flipkart Payments Pvt. Ltd.
e. These companies, in turn, hold stakes in five Indian entities: Flipkart India Pvt. Ltd, the wholesale cash-and-carry entity; Flipkart Internet Pvt. Ltd, which owns Flipkart.com and provides technology platform to e-commerce companies.
f. Digital Media Pvt. Ltd, currently a dormant company, formerly known as Digital Marketplace Pvt. Ltd ; Digital Management Services Pvt. Ltd that ran Letsbuy.com; and Flipkart Payment Gateway Services Pvt. Ltd, which ran payments product payzippy and is currently in middle of restructuring its operations and will continue to focus on payment services.
g. The ownership of FPL Singapore largely rests with Tiger Global, Accel Partners, Naspers and the Bansals. Tiger Global, the US-based hedge fund that holds close to 30% in the parent company, has two seats on the board.
h. This show just how important Flipkart has become to Tiger Global Management. According to Sources, Tiger Global has invested more than $700 million in Flipkart so far. That is significantly higher than what the firm invested in the likes of Facebook and Alibaba, making Flipkart one of Tiger Global’s biggest bets ever.
i. the Myntra acquisition in May, for an estimated value of $330 million, has opened doors for investors such as IndoUS Venture Partners, IDG Ventures and PremjiInvest to become part of Flipkart.
j. After the merger, all Myntra shareholders except co-founders Mukesh Bansal andAshutosh Lawania got stock in Flipkart Singapore.
k. Both Myntra co-founders received cash from Flipkart for their stakes, people familiar with the matter said. Neither Bansal and Lawania own any stake in Flipkart.We could not verify how much Bansal and Lawania received from Flipkart.
l. Mukesh Bansal now sits on the board of Flipkart India and continues to hold some stake in Myntra Holdings. He was also promoted to the role of Flipkart’s marketing chief earlier this month.
m. For the year ended 31 March 2014, the losses of all Flipkart India entities amounted to Rs.719.5 crore on revenue of Rs.3,035.8 crore.
n. Flipkart Marketplace Singapore alone posted a loss of Rs.3.55 crore on zero revenue for the year ended 31 March 2014.
Then there’s WS Retail, one of the most important pieces of the Flipkart puzzle. WS Retail was owned by Flipkart co-founders until September 2012. The Bansals and two of their relatives were also board members at WS Retail. In September 2012, Flipkart was forced to sell a large stake in WS Retail to former OnMobile Global Ltd chief operating officer Rajeev Kuchhal, just weeks before Indian regulatory agencies launched an investigation into the company’s business relationship with WS Retail.
Both the Bansals and their relatives gave up their board seats, too. Tapas Rudrapatna andSujeet Kumar control 46% of WS Retail, documents with the Registrar of Companies show. Rudrapatna and Kumar were employed by Flipkart at least until September 2012. WS Retail still accounts for more than 75% of Flipkart’s business, according to three other people familiar with the matter. WS Retail and Flipkart used to share offices until recently and continue to share at least one warehouse location in Bengaluru, though both companies have different spaces in the warehouse, one of the people cited above said.
After seeing such a complex structure, It has made us think more on the Taxation part of Flipkart. It has made us simple to review the Taxation applicable but also complex. Some major taxations which would be applicable are:
- Service Tax
- Transfer Pricing
- TDS / TCS
- And Finally Income Tax.
To know more Stay tuned, and follow, like, share, subscribe and Comment.
(This article was posted by Karan Khatrion his blog www.cakagyaan.wordpress.
Source: caclubindia.com