India’s largest online retailer Flipkart has raised a total of $1.4 billion from China’s Tencent, U.S.-based e-commerce firm eBay and software maker Microsoft. The funding is expected to help Flipkart build its war chest in the battle against Amazon.com Inc., which is rapidly gaining share in India’s online retail market.
The Bengaluru-based firm will also buy eBay’s India business as part of the transaction.
Flipkart said the new funding round valued the company at $11.6 billion. This is about 28% lower than the $15.2 billion valuation based on the $700 million of funding it raised in 2015.
“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,” Flipkart co-founders Sachin Bansal and Binny Bansal said in a statement.
“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 latest investment adds to an existing group of marquee investors that include Tiger Global Management, Naspers Group, Accel Partners and DST Global.
Strategic investor
Tencent has joined as a strategic investor, bringing experience in linking social networking and e-commerce. In leading this funding round, Tencent will lend significant expertise to Flipkart as it seeks to bolster its leadership position in India’s e-commerce market.
“This strategic partnership enables Tencent to participate in the exciting opportunities in e-commerce and payments in India,” Martin Lau, Tencent President, said in a statement.
Interestingly, in February, Microsoft had announced a strategic partnership with Flipkart, with the e-commerce company adopting the Microsoft Azure cloud computing platform.
EBay’s investment is accompanied by a strategic commercial agreement: In exchange for an equity stake in Flipkart, eBay will make a $500 million cash investment and sell its eBay.in business to Flipkart. EBay and Flipkart have also entered into an exclusive pact in which they will jointly pursue cross-border trade opportunities.
“eBay is committed to winning in India in partnership with Flipkart,” Devin Wenig, president and chief executive of eBay Inc., said in a statement. “Our exclusive global trade partnership will allow eBay and Flipkart to reach even more consumers around the world.”
The funding deal is expected to give Flipkart leverage against arch rival Amazon, the world’s largest online retailer. Founded by billionaire Jeff Bezos, Amazon has pledged to invest $5 billion in India in the next few years.
“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,” said Sandy Shen, research director at research firm Gartner. Ms. Shen said the latest funding round brings investment from strategic investors which would bring technology and market expertise that Flipkart needs, in contrast to the previous rounds of mostly financial investors. “The next challenge is to strategise the path to a sustainable business model within a set time frame,” she said.
Last December, Flipkart co-founder Sachin Bansal, and Ola Cabs co-founder Bhavish Aggarwal, called for policies that protect domestic companies against their global competitors Amazon and Uber. They alleged that these firms were “dumping capital” to win customers.
