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SoftBank invests $2.5 billion in Flipkart

This is the largest capital infusion in a homegrown startup

Everything about entrepreneurship, the good, bad and the ugly of it, fascinates me. I take a keen interest on startups and venture capital firms and have written extensively on fundraises, M&As and business strategies. I can safely say changing tracks from engineering to journalism has been one of my best decisions. When not working, I indulge in almost every Indian's poison, cricket, playing or watching. I am a foodie and video game buff.

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Image: Sachin Bansal and Binny Bansal/ Getty Images

Online marketplace Flipkart has bagged about $2.5 billion in fresh funds from the SoftBank Vision Fund in the largest-ever capital infusion in the domestic consumer Internet space, a move that will give significant financial heft to the ecommerce firm to battle Amazon.

The fresh investment is an extension of the funding round that saw Flipkart raising $1.4 billion from Tencent, eBay and Microsoft in April at a valuation of $11.4 billion, about 23% less than its peak valuation of $15 billion.

Flipkart and SoftBank did not comment on the quantum of investment, but said the company now has a cash reserve of more than $4 billion.

According to a person aware of the development, SoftBank Vision Fund’s investment was a mix of primary and secondary transactions. Tiger Global Management, one of the earliest backers of Flipkart, partially sold its stake to SoftBank. This deal makes SoftBank one of the largest shareholder in Flipkart.

“This is a monumental deal for Flipkart and India. Very few economies globally attract such overwhelming interest from top-tier investors. It is recognition of India’s unparalleled potential to become a leader in technology and ecommerce on a massive scale. SoftBank’s proven track record of partnering with transformative technology leaders has earned it the reputation of being a visionary investor. We’re excited to welcome the Vision Fund as a long-term partner as we continue to build our business with a focus on serving the needs of all Indians, and driving the next phase of technology adoption in India,” Flipkart co-founders Binny Bansal and Sachin Bansal said in a statement.

SoftBank has seen some of its investments in India’s consumer Internet segment such as Snapdeal and real estate portal Housing.com wither. The company was, until recently, leading talks for the sale of Snapdeal to Flipkart to salvage a part of its investment and, subsequently, invest fresh capital into Flipkart. The talks, however, did not materialise.

“India is a land of vast opportunity. We want to support innovative companies that are clear winners in India because they are best positioned to leverage technology and help people lead better lives. As the pioneers in Indian e-commerce, Flipkart is doing that every day,” Masayoshi Son, founder and chairman and chief executive at SoftBank Group Corp, said in a statement.

The fresh funds for Flipkart come at a time when the company is scripting a revival in the face of rapid advances by Amazon, which has committed an investment of $5 billion in India.

SoftBank has taken some big bets in Indian startups since Ocober last year, when it pumped in about $250 million in ride hailing services Ola, which competes with the world’s most valuable start-up Uber.

It invested $1.4 billion in digital payments company Paytm at a valuation of more than $7 billion in May.

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