Flipkart Buys eBay India; Raises USD 1.4 Bn Funding
Amidst growing rumours of a merger between e-commerce giants Flipkart and Snapdeal, Flipkart just announced that it has raised a mammoth sum of $1.4 billion from Tencent, eBay and Microsoft, as part of the biggest ever fund raising deal in the Indian startup ecosystem.
With this round of funding, the Flipkart valuation has reached $11.6 billion and IT major Microsoft joins Flipkart as a strategic investor. Flipkart’s existing investors include Tiger Global Management, Naspers Group, Accel Partners and DST Global.
“Flipkart Group has raised a total of $1.4 billion from Tencent, eBay and Microsoft — three of the world’s premier technology companies,” Flipkart said in a statement, adding that “The latest funding round, at a post transaction valuation of $11.6 billion, is the largest in Flipkart’s 10 year history as well as in the Indian Internet sector and comes as Flipkart gears up to drive the next phase of e-commerce growth in India,” the online marketplace said.
Launched in 2007, Flipkart claims to have over 100 million registered users. Flipkart founders Sachin Bansal and Binny Bansal said it’s a landmark deal for the company and for India as it endorses the firm’s tech prowess, innovative mindset and the potential to disrupt traditional markets.
“It is a resounding acknowledgement that the homegrown tech ecosystem is indeed thriving and succeeding in solving genuine problems in people’s daily lives across all of India,” the founders said.
The Flipkart group owns several well known Indian brands such as Myntra, Jabong, PhonePe and Ekart.
The devaluation also indicates Indian e-commerce companies have lost luster with investors as they struggle to become profitable. On the contrary, retail major Amazon has kept the ball rolling in India, investing billions in the country.
China based Tencent owns social messaging app WeChat and has investments across various online companies like Practo, Ibibo etc. “This strategic partnership enables Tencent to participate in the exciting opportunities in e-commerce and payments in India. We look forward to helping Flipkart to deliver compelling experiences,” said Martin Lau, Tencent President.
“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 India business to the company. eBay India will continue to operate as an independent entity as a part of Flipkart,” the statement said.
“The combination of eBay’s position as a leading global e-commerce company and Flipkart’s market stature will allow us to accelerate and maximise the opportunity for both companies in India,” said Devin Wenig, President and CEO of eBay Inc.
On the recent deal, Sandy Shen, Research Director, Gartner said, “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.”
According to Shen, “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.”
He believes that 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.
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