In what will be the biggest funding round in Flipkart's history, the Indian e-commerce giant has raised $1.4 billion from tech giants Tencent, eBay and Microsoft. Separately, eBay, which has struggled to scale up its India business, will be selling ebay.in to Flipkart in return for an equity stake at the homegrown e-commerce major.
Flipkart's fund-raise comes at a time some of its rivals like Snapdeal have been unable to raise fresh funds and are struggling to turn profitable. Snapdeal recently fired hundreds of employees and its founders took a 100 per cent pay cut. Incidentally, there have been media reports indicating that Flipkart is likely to acquire Snapdeal.
With the fresh round, Tencent, eBay and Microsoft join existing marquee investors like Tiger Global Management, Naspers Group, Accel Partners, Singapore's GIC, Qatar Investment Authority and DST Global in Flipkart.
“We are delighted that Tencent, eBay and Microsoft—all innovation powerhouses—have chosen to partner with us on their India journey. We have chosen these partners based on their long histories of pioneering industries and their unique expertise and insights each of them bring to Flipkart,” said Flipkart founders Sachin Bansal and Binny Bansal.
Tencent is one of the leading provider of internet value-added services in China and is already an investor in Indian start-ups like chat app Hike Messenger and healthcare technology firm Practo. Tencent joins as a strategic investor, bringing experience in linking social networking and e-commerce.
“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 to users throughout India, and to contribute to the development of the internet ecosystem there,” said Martin Lau, president, Tencent.
Prior to the current round, Flipkart had raised more than $3 billion in total.
Acquisition of eBay.in is a part of strategic commercial agreement, as per which, eBay is investing in and selling its India business to Flipkart in exchange for an equity stake in the latter. However, eBay.in will continue to operate as an independent entity under Flipkart.
“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,” said Devin Wenig, President and CEO, eBay Inc.
Flipkart and eBay also signed exclusive cross-border trade agreements, which will allow Flipkart customers gain access to eBay's global inventory, while eBay's customers will have access to Indian products sold by Flipkart's sellers. This will give an opportunity for sellers on Flipkart to expand their businesses abroad.
The latest fund-raising gives Flipkart a post-transaction valuation of $11.6 billion. This is significantly lower than the $15.2-billion valuation it commanded when it raised $700 million in 2015. It has seen several valuation markdowns by investors in the past.
However, the new fund-raise will give a much needed energy boost for Flipkart at a time when there is growing pressure from rival Amazon, and China's e-commerce giant Alibaba also upping presence in India through its investment in mobile wallet Paytm's online marketplace.
In January, former Tiger Global executive Kalyan Krishnamurthy was appointed as Flipkart's CEO, replacing Binny Bansal, who was named group chief executive, in a major management restructuring by the company.
