April 2017
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Flipkart acquires eBay’s India biz to fight Amazon
(MUMBAI, Apr, 10,2017): India's largest ecommerce firm Flipkart said Monday it has raised $1.4 billion led by China's internet giant Tencent, with participation from the online auction site eBay and Microsoft, valuing the Bengalurubased company at $11.6 billion, post the investment.

This marks the largest capital infusion for any privatelyheld Indian internet venture and surpasses the earlier high set by Flipkart itself when in July 2014 it picked up $1 billion and set the stage for a funding boom in the local startup ecosystem.

The latest financing round for Flipkart comes amid talks of the etailer's likely acquisition of its domestic rival the Softbankbacked Snapdeal, further consolidating the cashguzzling ecommerce market, as reported by TOI in its March 28 edition.

Flipkart's muchanticipated fundraise has been in the making for months even as it faced a series of valuation markdowns by its existing investors over the past year.

The domestic ecommerce player was earlier valued at $15.2 billion when it last raised $700 million from existing investors in July 2015. TOI reported about Flipkart's latest fund raise in its March 16 edition.

As part of this transaction, eBay Inc has put $500 million in Flipkart and sold its India business to the Bengaluru firm.

The online auction site will continue to be run as an independent entity, a statement from Flipkart said. Sources said eBay India may have been valued at about $200 million, however, the contours of the deal were not specified. Tencent and Microsoft have collectively pumped $900 million in Flipkart.

"Once the Snapdeal acquisition comes through, SoftBank, the online retailer's largest shareholder may put $500 million in Flipkart as primary money besides buying secondary shares from Tiger Global," a source privy to the developments said.

Tiger Global, a New Yorkbased investment fund is the largest investor with about 30% stake in Flipkart.

Flipkart's humongous raise will give it firepower and bolster its position as it fights a fierce battle with the Seattlebased internet behemoth Amazon, which has allocated $5 billion for the India market and launched a wide set of offerings ranging from Prime subscription service to Prime Video even as it prepares to push the peddle on categories like food and grocery.

In a prepared statement, Flipkart founders, Sachin and Binny Bansal, who are unrelated, said, "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.

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 Bansals, cofounded Flipkart ten years ago, as an online bookstore and expanded to become a horizontal ecommerce player modelled on their ex employer the Jeff Bezosled Amazon. They are not involved with the daytoday operations at the company, presently.

Tencent, eBay Seen As Strategic Investors China's Tencent, which runs the hugely successful messenger service We Chat, is being positioned as a strategic investor along with eBay after years of getting on board financial backers in Flipkart.

Tencent joins as a strategic investor, bringing experience in linking social networking and ecommerce. In leading this funding round, Tencent will lend significant expertise to Flipkart, a company statement said.

"This strategic partnership enables Tencent to participate in the exciting opportunities in ecommerce and payments in India.

We look forward to helping Flipkart to deliver compelling experiences to users throughout India, and to contribute to the development of the internet ecosystem there," said Martin Lau, president of Tencent.

Flipkart owns PhonePe, a UPIbased payments platform. Post its acquisition, eBay India will be reporting to Flipkart's CEO Kalyan Krishnamurthy, an exeBay executive who was handed over the baton at the online retail firm in January this year.

Krishnamurthy, who came from Tiger Global has been engineering a turnaround at Flipkart starting from its annual festive sale last year in October when it pipped Amazon in gross sales.

"The combination of eBay's position as a leading global ecommerce company and Flipkart's market stature will allow us to accelerate and maximize the opportunity for both companies in India," said Devin Wenig, president and CEO,eBay Inc.

eBay has a small shareholding in Snapdeal, an investment that hasn't worked out while their own India operations never really took off.Coming in even at this valuation holds promise for eBay considering the potential of the Indian ecommerce market is still huge, said people tracking the space.

Binny Bansal, CEO of the Flipkart group, comprising Myntra, Jabong and PhonePe, said in an internal mail to the company employees that the valuation of the firm remains healthy and in double digits and was reflective of the current business and the global economy.

"While this funding provides the fuel, we need to reach that goal, we have to continue growing our business with careful considerations to costs," he cautioned Prior to this, Flipkart had raised $3.4 billion from investors such as Tiger Global, Naspers, GIC of Singapore, Qatar Investment Authority and Yuri Milner's DST across multiple financing rounds.

"This funding will give Flipkart some breathing space for sure. This round still has space for SoftBank to join in which will be a real shot in the arm for the etailer in terms of access to long term capital," an investor said.

"With a possible deal with SoftBank being in the works, it will likely be SoftBank and new Flipkart investors versus Amazon for now because Alibaba is still putting a lot of its focus in southeast Asian markets before going full throttle in India," said Satish Meena, analyst at Forrester.

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