As Japanese telecom and internet conglomerate SoftBank strives to get a stronger grip on India’s $30 billion ecommerce market, it may soon invest $500 million in Flipkart, the country’s largest ecommerce company, said sources in the know of the matter.
“This will be part of the Snapdeal-Flipkart deal, where some of the existing Snapdeal investors are looking for an exit,” said one of the two sources FactorDaily spoke to.
The grapevine has it that SoftBank has planned a $2 billion investment in Flipkart, a part of which will be primary funding. “The entire money is not coming as a primary investment. Effectively, Flipkart will get only $500 million out of the $2 billion as primary funds,” said the second source.
“The entire money is not coming as a primary investment. Effectively, Flipkart will get only $500 million out of the $2 billion as primary funds” — a source close to the development
The remaining money — $1.5 billion — “is to pay back Tiger (Global), Snapdeal investor.” Tiger Global is Flipkart’s largest shareholder and is said to be running the ecommerce company. Former Tiger Global managing director Kalyan Krishnamurthy is the current CEO of Flipkart.
Kalaari Capital and Nexus Ventures Partners, two of the larger Snapdeal investors who also hold board seats, will get an exit. Kunal Bahl and Rohit Bansal, founders of Snapdeal, along with a couple of dozen other small and mid-sized investors, will exit the company as well. Tiger Global, too, will go for a partial exit from Flipkart, one of the sources said.
In a recent turn of events, Flipkart offered $750 million to $800 million for Snapdeal after it completed the due diligence for acquiring the company. Snapdeal’s board, where SoftBank holds two of the right sears, rejected the offer. Flipkart had earlier agreed to pay $1 billion to Snapdeal.
According to recent news reports, Flipkart will make a new and a higher offer to Snapdeal. SoftBank will get two seats in the merged entity.
A time of consolidation in ecommerce
SoftBank has triggered a series of exits in India, starting from merging Housing.com (an online real estate portal) with PropTiger in an all stock deal. It is also helping Tiger Global make an exit from Ola, the cab-hailing company, as SoftBank plans to buy the former’s stake for $700 million.
Earlier, FactorDaily had reported how SoftBank played foul by not allowing Snapdeal to raise money, and not giving promised funds to run the company.
SoftBank recently invested $1.4 billion in Paytm, the mobile wallet company modelled around China’s Alibaba Group. Paytm Mall, the ecommerce arm of One97, Paytm’s holding company, is in talks with e-grocer BigBasket. Paytm is also backed by Alibaba.
These deals will leave only three large ecommerce players in India — Flipkart, Alibaba and Amazon. Flipkart has already bought fashion platforms Myntra and its rival Jabong
Alibaba’s Jack Ma and SoftBank’s Masayoshi Son are good friends. Their relationship, largely due to SoftBank’s association with Alibaba, is nearly a couple of decades old.
These deals will leave only three large ecommerce players in India — Flipkart, Alibaba and Amazon. Flipkart has already bought fashion platforms Myntra and its rival Jabong. The consolidation made Flipkart the largest online seller of fashion and clothing.
Amazon is close behind, in some months even beating Flipkart in app downloads and user traffic. Its founder, Jeff Bezos has already committed $5 billion to build Amazon’s india operations.
Meanwhile, the logical journey for Flipkart was to get merged into Paytm Mall to take on Amazon. “But I don’t think that is happening any more, especially after Tencent invested in Flipkart,” said sources.
Updated at 8.32am on 17 July, 2017, to add the disclosure.
Updated at 9.36am on 17 July, 2017, to correct two typos.
Disclosure: FactorDaily is owned by SourceCode Media, which counts Accel Partners, Blume Ventures and Vijay Shekhar Sharma among its investors. Accel Partners is an early investor in Flipkart. Vijay Shekhar Sharma is the founder of Paytm. None of FactorDaily’s investors have any influence on its reporting about India’s technology and startup ecosystem.