eBay, Tencent reported likely to invest $1 bn for Flipkart stake

eBay and Tencent are likely to pick up stake in India's largest e-commerce marketplace Flipkart with an investment of $1 billion, as they look to get a stronghold in the country's fast-growing online retail space.

According to a Times of India report, the latest funding round values the Bengaluru-based firm at $11 billion, lower than the $15.2 billion valuation it had achieved in its previous round. However, this figure is far higher than the $5.39 billion valuation mutual fund investors such as Morgan Stanley have given Flipkart.

Flipkart has been in talks to raise funds for several months now, with the valuation of the Indian ecommerce leader being the main contention for investors walking away. Talks between China's Alibaba and US retail giant Walmart are said to have fallen apart after both parties were unwilling to value Flipkart at the $12 billion which it was asking. 

It isn't clear if Tiger Global, the largest investor in Flipkart which has pumped in an estimated $1 billion into the company over several rounds, will sit this round out.

Kalyan Krishnamurthy, chief executive of Flipkart, was an eBay executive who then moved to investor Tiger Global and then eventually was put in place at the Indian company to steer it in the face of growing aggression from American rival Amazon.

Krishnamurthy's biggest success calling the shots at Flipkart has been the success of the BigBillionDays sale last year, when it pipped Amazon by a big margin according to industry watchers.

Amazon in a short span of three and a half years has been able to close the gap with Flipkart. The US online retailer's aggression in the Indian market has caused knee-jerk reactions from the Indian firm, which initially stepped up spending to keep up, but was then forced to cut its cash burn when investors began demanding profitability.

Even with the $1 billion cash infusion, it isn't clear if Flipkart will step up discounting across the board or will it continue to chase frugal growth as it has been doing so for the past few quarters. As Amazon begins picking off categories in which Flipkart is dominant, Krishnamurthy will have to decide whether it's worth letting go of some turf and working on improving customer experience which could eventually bring customers back.