Flipkart Buys eBay India As Part Of $1.4-Billion Funding Round

The funding round values Flipkart at $11.6 billion.

Flipkart Ltd. signage is displayed outside the company’s headquarters in Bengaluru, India (Photographer: Namas Bhojani/Bloomberg)
Flipkart Ltd. signage is displayed outside the company’s headquarters in Bengaluru, India (Photographer: Namas Bhojani/Bloomberg)

Flipkart Group raised $1.4 billion from Tencent Holdings, eBay Inc and Microsoft Corp in India’s biggest-ever startup funding round that will help the country’s largest online retailer take on American rival Amazon Inc.

The fund-raise values Flipkart at $11.6 billion, 23.6 percent lower than its peak valuation of $15.2 billion in 2015 when it raised $700 million from Tiger Global and existing investors including Steadview Capital.

“This is a landmark deal for Flipkart and for India as it endorses our tech prowess, our innovative mindset and the potential we have to disrupt traditional markets,” e-tailer’s founders Sachin Bansal and Binny Bansal said in a statement.

Flipkart’s latest fund-raise comes even as SoftBank, which owns nearly a third of rival Snapdeal’s parent Jasper Infotech Pvt., is pushing to merge the two e-tailers to create an online giant that can take on Amazon, Bloomberg reported quoting people familiar with the development. Amazon has committed to invest $5 billion in Asia’s third largest economy, betting that more people will shop online as internet penetration improves.

The funding is good news for Flipkart as it “solidifies it as a market leader”, at least in the short term, keeping Amazon at bay, said Sandy Shen, research director at technology research Gartner, in a statement.

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
Sandy Shen, Research Director, Gartner

Prior to the latest round, Flipkart had raised $3.1 billion, according to Crunchbase, which aggregates information on startups. Flipkart’s existing investors include Tiger Global Management, Naspers Group, Accel Partners and DST Global.

Flipkart Acquires eBay India

As part of Flipkart’s fund-raise, eBay is making a cash investment in and selling its India business to Flipkart, the statement said. will continue to operate as an independent entity under Flipkart. Both Flipkart and eBay have also signed an exclusive cross-border trade agreement, which will allow sellers on Flipkart to expand their sales globally and vice-versa.

Apart from money, what value eBay brings to the table is yet to be seen, said Harminder Sahni, founder of retail consultancy Wazir Advisors. “It is more like one less competitor and whatever money eBay was burning, that will be done by Flipkart now.”

The deal is more all about what an investor wants, and these deals only have a paper value. The real game is yet to be seen as how business pans out. Flipkart should instead focus more on the business at this time if they want to fight against Amazon
Harminder Sahni, Founder, Wazir Advisors

The 10-year-old startup has seen multiple valuation markdowns in the past one year. The latest came in March when Macquarie Group’s Optimum Fund slashed the value of its stake in India’s largest online marketplace, bringing its valuation to $9.95 billion.

In January this year, Flipkart had named former Tiger Global executive Kalyan Krishnamurthy as its chief executive as part of a new organisation structure.