Flipkart raises $1.4 billion

EBay to sell its Indian arm to Flipkart; Would also invest $500 mn

Country’s largest e-commerce firm Flipkart has raised $1.4 billion in fresh round of investment as it builds war chest to fight an aggressive American behemoth Amazon to retain number one position in the market.

This is the biggest investment raised by Flipkart in its 10 years history.

Tencent Holdings, Microsoft Corp and eBay Inc participated in the funding round, which valued the e-commerce firm at $11.6 billion.

However, this valuation is lower than the $15 billion it achieved at its last fund raising in 2015.

This is for the first time that Flipkart has seen a downfall in its valuation while actually raising fresh funds.

In May 2014, the firm was valued at $2.5-3 billion which went up to $7 billion in July 2014 when company raised $1 billion for the first time. In December 2014, when firm raised $700 million its valuation shot up to $11 billion and peaked in July 2015 at $15.2 billion.

But 2016 saw a number of investors mark-down their investment in Flipkart. A Morgan Stanley mutual fund last year slashed value of its Flipkart shares, pegging the firm at just $5.54 billion, biggest mark-down by any investor till date.

Before the latest round, Flipkart had raised more than $3 billion in funding through 10 rounds. While Flipkart has seen its valuation come down, its Indian rival Snapdeal has been struggling to raise funds to compete in the market. Investors are wary of investing in ecommerce firms who have been offering deep discounts and burning cash to maintain their sales growth.

At the same time Amazon is aggressively expanding in Indian market after missing the bus in China.

Amazon last year said it would invest over $5 billion in India.

Masayoshi Son-led SoftBank which is one of the biggest investor in Snapdeal is pushing its merger with Flipkart, to create a stronger domestic player to battle Amazon.

The fresh funding for Flipkart may have come at a lower valuation but it is giving an indication of a turnaround under new CEO Kalyan Krishnamurthy and investors confidence that the firm will turnaround things.

Sachin Bansal and Binny Bansal said that the deal is as an endorsement of the Indian startup’s tech prowess, innovative mindset and its potential to disrupt traditional markets.

As part of the fund raising on Monday, eBay invested $500 million in Flipkart for a stake. In exchange, eBay will merge its India operations with Flipkart. eBay.in will continue to operate as an independent entity as a part of Flipkart.