MUMBAI (NewsRise) -- eBay plans to relaunch operations in India after selling a minority stake in Flipkart Internet as the U.S. online marketplace strives to stay relevant in the south Asian nation's fast-growing e-commerce market.
The U.S. company will sell its stake in Flipkart to Walmart for about $1.1 billion, it said in a statement late Wednesday, soon after Walmart made its much-awaited announcement about picking up a 77% stake in Flipkart for $16 billion. eBay had purchased an undisclosed stake in Flipkart for $500 million in cash in April last year.
Under that deal, the company gave Flipkart its platform eBay.in to own and operate. The two also got into an arrangement to jointly pursue cross-border trade opportunities to make eBay's global inventory accessible to more Indian consumers.
Flipkart was to acquire eBay's buyers in India, while eBay removed the number of active buyers in India from its financial reporting.
On Wednesday, eBay said it will end its "current strategic relationship" with Flipkart, which includes unwinding commercial agreements with the company and terminating the Indian e-commerce firm's license to use the eBay.in brand.
The company said it will now relaunch eBay India with "a differentiated offer to focus initially on the cross-border trade opportunity."
eBay's move to re-enter India comes at a time when the south Asian nation's e-commerce market is surging on the back of proliferation of smartphones and expansion of mobile networks amid a plunge in data tariffs. Last year, internet traffic in India jumped more than two times alongside the fast pace of fourth-generation wireless network roll out.
According to Morgan Stanley, India's e-commerce market is projected to be worth $200 billion in the next 10 years. Flipkart is the largest e-commerce player in the country with a 57% share of the market, while U.S. online retailer Amazon ranks second with a 30% share, Morgan Stanley says.
Under the deal between Walmart and Flipkart, the U.S. retailer is set to immediately inject $2 billion into Flipkart, fortifying the Indian company's lead against Amazon.
Amazon has already pledged to spend $5 billion in India.
Most analysts expect the new Walmart-Flipkart combine and Amazon to together retain 80% of the market.
Still, that hasn't ruffled eBay's ambitions to grow in India.
"We believe there is huge growth potential for e-commerce in India and significant opportunity for multiple players to succeed in India's diverse domestic market," eBay said.
eBay's decision to go it alone in India springs a surprise as it comes on the back of a failed investment in 2014, when it led a $133 million funding in smaller local e-commerce company Snapdeal. Japan's SoftBank-backed Snapdeal, which struggled to raise funds last year amid valuation concerns, has been grappling with declining revenue and shrinking operations.
In February, eBay said in its annual report that its $61 million investment in Snapdeal had to be written off.
"eBay had kind of exited India with the sale of India unit to Flipkart and the write-off of the investment in Snapdeal," said Satish Meena, an analyst at Forrester Research. "To come back again now, when the market is consolidated, is surprising."
--Dhanya Ann Thoppil