August 10, 2017 9:01 pm JST

India's Flipkart receives big investment from SoftBank fund

Deal comes after failed talks to merge with Snapdeal

The logo of India's largest online marketplace Flipkart is seen on a building in Bengaluru, India. © Reuters

MUMBAI (NewsRise) -- Flipkart Group has won an investment from Japan's SoftBank Vision Fund in a deal that makes billionaire Masayoshi Son's technology fund one of the biggest shareholders in India's largest e-commerce company.

The undisclosed investment amount, touted the biggest ever private funding in an Indian technology company, comes barely a week after the collapse of a proposed a merger between Flipkart and SoftBank-funded Snapdeal.com. Reuters reported, citing people it didn't identify, that SoftBank Vision Fund has invested $2.5 billion in Flipkart through primary and secondary purchases.

The latest deal further consolidates SoftBank's position in one of the fastest-growing e-commerce markets in the world, where it invested $1.4 billion in another Internet firm One97 Communications just three months ago.

For Flipkart, which has the backing of investors including China's Tencent Holdings and U.S. eBay Inc., the deal offers a much-needed ammunition to fend off the biting competition from rival Amazon.com. The U.S. giant had last year more than doubled its investment in India to $5 billion in a bid to turn it into its largest market after the U.S.

With the latest round of funding, Flipkart has more than $4 billion in cash on its balance sheet, the company said in a statement on Thursday.

The investment is part of the previous financing round in April, when Flipkart raised $1.4 billion from Tencent Holdings, eBay and Microsoft, the Indian company said. That deal valued Flipkart at $11.6 billion.

For Flipkart, the deal offers not just billions of dollars, but "a long-term ally" in SoftBank to draw more funds in its fight against Amazon, said Satish Meena, an analyst at Forrester Research. "Now funding is not a problem for Flipkart for at least two-three years. The challenge is to match Amazon's product offering, which it tweaks every now and then to make it stickier for consumers."

Flipkart, which started by selling books on the Internet in 2007, was struggling to raise money until last year, hobbled by a tough private funding environment and shrinking valuations. Amazon's entry into India in 2013 had eroded Flipkart's cash further as it struggled to compete with the U.S. company offering steep discounts.

SoftBank, which is one of the earliest backers of China's Alibaba Group Holding, is looking to repeat that saga with Flipkart in India, Meena said. SoftBank's $20 million investment in Alibaba at the beginning of this decade is worth $100 billion now.

"India is a land of vast opportunities. We want to support innovative companies that are clear winners in India because they are best positioned to leverage technology," said Son, the founder and chairman and CEO of SoftBank Group.

SoftBank was at the forefront to stitch up a deal between Flipkart and Snapdeal.com, owned by Jasper Infotech. But its efforts were thwarted after the founders of Snapdeal --Kunal Bahl and Rohit Bansal -- resolved to stay independent.

Soon after calling off a potential deal, Chief Executive Bahl said the company, which has been steadily ceding market share to Flipkart and Amazon, will run a stripped-down version of its online marketplace in its second-coming and sell some of its non-core assets.

Son had at that time said he respects Snapdeal's decision to pursue an independent strategy. "We look forward to the results of the Snapdeal 2.0 strategy and to remain invested in the vibrant Indian e-commerce space," he said in a statement last month.

SoftBank, one of the earliest foreign tech-focused investors in Indian startup companies, is taking bigger bets in India, though several of its initial bets turned sour. According to some media reports, the company is looking to merge Grofers, a small grocery-app it backs, with larger rival BigBasket. Earlier this year, one of its portfolio companies online real estate Housing.com that was riddled with losses and management churn was merged with News Corp.-backed PropTiger.com.

It has already invested in ride-haling service Ola, a local challenger to Uber, the largest Internet startup in the world.

--Dhanya Ann Thoppil

SoftBank Group Corp.

Japan

Market(Ticker): TKS(9984)
Sector:
Industry:
Technology Services
Information Technology Services
Market cap(USD): 96,971.94M
Shares: 1,100.66M
Asia300

Tencent Holdings Ltd.

China

Market(Ticker): HKG(700)
Sector:
Industry:
Technology Services
Internet Software/Services
Market cap(USD): 431,701.01M
Shares: 9,498.88M
Asia300

Alibaba Group Holding Ltd.

China

Market(Ticker): NYS(BABA)
Sector:
Industry:
Retail Trade
Internet Retail
Market cap(USD): 443,448.15M
Shares: 2,529.36M

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