Image: Abhishek N Chinnappa/ Reuters (For illustrative purposes only)
Flipkart Internet, India’s largest online shopping business, has raised fresh funding from three strategic investors, Tencent Holding, eBay Inc. and Microsoft Corp., the company said in a news release on Monday, confirming strong rumours that been outed earlier in multiple media reports.
As part of the deal, Flipkart is also acquiring the Indian operations of eBay Inc., the Bengaluru company said in the release. This helps Flipkart consolidate its position, and helps it counter Amazon’s ‘global store’ option even as it is said to be in talks to acquire Delhi rival Snapdeal.
The fund raise, a ‘down round’ which sees Flipkart’s notional value pared to $11.6 billion from $15.2 billion after its previous funding exercise in July 2015, ends the uncertainty surrounding the way forward for the company as it seeks to consolidate its position in India’s nascent ecommerce market.
“This is a landmark deal for Flipkart and for India,” co-founder Sachin Bansal and Binny Bansal said in the press release. “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 Bansals (no relation) added.
The Bansals, former employees of Amazon.com Inc, will soon celebrate the 10th anniversary of their venture, which has managed to hold its own against the deep-pocketed American giant, even as China’s Alibaba Group prepares to expand in India. The funding buys Flipkart time to execute on its strategy to build out many more categories — beyond smartphones — and go deeper into small-town India, taking advantage of its local experience.
“Flipkart is a leader in e-commerce in India, with strong operational expertise and a deep understanding of user behaviour. This strategic partnership enables Tencent to participate in the exciting opportunities in e-commerce and payments in India,” Martin Lau, president of Tencent, said in the press release.
Tencent, which joins Flipkart as a strategic investor, brings experience in linking social networking and e-commerce, Flipkart said in the press release. Tencent’s WeChat messaging and payments platform is one of two dominant such services in China, the other being Alipay, from Alibaba Group.
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 a part of Flipkart, according to the company’s release.
Flipkart and eBay have also signed an exclusive cross-border trade agreement. As a result of the partnership between Flipkart and eBay, customers of Flipkart will gain access to the wide array of global inventory on eBay, while eBay’s customers will have access to more unique Indian inventory provided by Flipkart sellers. Thus, sellers on Flipkart will now have an opportunity to expand their sales globally.
“The combination of eBay’s position as a leading global e-commerce company and Flipkart’s market stature will allow us to accelerate and maximize the opportunity for both companies in India,” Devin Wenig, president and CEO of eBay, said in the release.