India’s top e-commerce marketplace Flipkart has raised $1.4 billion in a fresh round of investment from Microsoft, eBay, and China’s Tencent Holdings. This is the largest investment raised by Flipkart in any fundraising round in its 10 years history. Clearly, by sealing this deal Flipkart has managed to up its stakes for battling it out with its archrival Amazon in India, heating up the competition for dominance in the e-commerce sector.
This move pushes Amazon to a tough spot. Amazon announced last year it would invest over $5 billion in India and has recently made a foray into online video and grocery shopping in India. Currently, Amazon, Snapdeal, and Flipkart are the largest e-commerce firms in India, but still, it is too early to say who will grab the top slot. Richard Windsor, an analyst at Edison Investment, says in a research note, it is still anyone’s game to win.
This fundraising valued Flipkart at $11.6 billion. This is significantly lower than the $15 billion valuations it achieved at its previous fundraising in 2015, embodying how competition has escalated since then. India is the world’s fastest-growing e-commerce market as online shopping has become the norm of the day for a rising middle class.
This funding also includes eBay India acquisition. Flipkart has entered into a tactical strategic agreement with global e-commerce giant eBay as per which the latter has sold its India business eBay.in to Flipkart and in addition, has made a cash investment worth $500 million in exchange for an unrevealed equity stake. The e-tailer said that the deal is expected to close later this year and that eBay.in will continue its operations as an independent entity within Flipkart. The company further informed that a unique trans-border agreement has also been signed which will consequentially allow Flipkart’s customers to access eBay’s global inventory while eBay’s customers will gain access to Flipkart’s inventory. This partnership with eBay is expected to help Flipkart in attaining supremacy in the e-commerce market, sidelining Amazon as well as bracing up for the future entry of China’s Alibaba.
While Flipkart has witnessed a notable dip in its valuation, its smaller Indian rival Snapdeal has been struggling to raise funds to compete in the market. In the wake of Snapdeal’s diminishing share of the e-commerce market, Masayoshi Son led SoftBank, one of the biggest investors in Snapdeal, is throwing weight on its merger with Flipkart, to create a stronger domestic player to compete with Amazon.
The fundraising also comes amidst speculation Flipkart may consider a takeover of rival Snapdeal. Also, according to local media reports SoftBank Group is eager to give away its share in Snapdeal, India’s third-biggest e-commerce player, in exchange for a stake in Flipkart. If Flipkart achieves the acquisition of Snapdeal holding on to all of its users, it will march way ahead of Amazon in terms of its share of active users which will then be 49% which is more than double than that of Amazon.