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Flipkart buys eBay India biz as part of $1.4 billion fund raising deal

11-April-2017
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Flipkart buys eBay India biz as part of $1.4 billion fund raising deal

Flipkart has raised $1.4 billion from Tencent, eBay, and Microsoft, and has acquired eBay India as part of its latest round of fund raising, the company announced on Monday.

The latest funding round from the three global technology giants, at a post-transaction valuation of $11.6 billion, adds to an existing group of marquee investors that include Tiger Global Management, Naspers Group, Accel Partners, and DST Global. This is the company’s biggest investment in its 10-year history.

 

 

The investment by eBay is accompanied by a strategic commercial agreement with Flipkart. In exchange for an equity stake in Flipkart, eBay is making a cash investment in and selling its eBay.in business to Flipkart. eBay.in will continue to operate as an independent entity as part of Flipkart, with the business unit reporting to Flipkart CEO Kalyan Krishnamurthy.

In an internal email sent by Binny Bansal, a copy of which is available with us, Bansal says Flipkart’s valuation remains “healthy and in double digits”.

“These partnerships bring in a lot more than funds. They set us up to compete more aggressively through innovations. We can now collaborate deeply with eBay on cross border trade and ensure our customers have a wider selection of international products to choose from. Tencent, one of the largest internet companies in the world, and Microsoft also join us as strategic investors,” the email read.

Bansal further stated in the email that e-commerce accounts for less than 2 per cent of all retail in India and the potential for online retail alone is about $100 billion.

 

 

“We are delighted that Tencent, eBay and Microsoft—all innovation powerhouses—have chosen to partner with us on their India journey. We have chosen these partners based on their long histories of pioneering industries, and the unique expertise and insights each of them bring to Flipkart. This deal reaffirms our resolve to hasten the transformation of commerce in India through technology,” said Sachin Bansal and Binny Bansal, founders of Flipkart, in a media statement.

Flipkart has been rumoured to be in the market for a takeover of key rival Snapdeal over the past few weeks as it prepares to take on the might of Amazon, which has identified India as its key focus market in Asia.

“This is good news for Flipkart as it solidifies it as a market leader at least in the short term, keeping competition especially Amazon at bay. It is interesting to note that this round sees the investment from strategic investors that will bring technology and market expertise that Flipkart earnestly needs, in contrast to the previous round of mostly financial investors. Although India’s e-commerce market is still at an early stage, the market is seeing signs of consolidation as scale is a key success factor in the business. Flipkart has been and will continue to make acquisitions to increase scale, and the next challenge is to strategize the path to a sustainable business model within a set time frame. Hopefully, with the funding and expertise it is getting from the investors, it will be able to establish itself as a true market leader from both the technology and operational perspectives,” opined Sandy Shen, Research Director at Gartner.

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