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Flipkart raises Rs2,600 cr from Tencent, Microsoft; to absorb eBay

11 April 2017

India's ecommerce leader Flipkart has raised $1.4 billion (Rs2,600 crore) in the biggest fundraising by an Indian internet company to date as it battles US giant Inc for a larger share of the country's burgeoning online retail market.

Tencent Holdings Ltd, Microsoft Corp and eBay Inc participated in the funding round, Flipkart said in a statement on Monday.

This would value the Indian company at $11.6 billion - lower than the $15 billion valuation it achieved at its last fundraising in 2015, reflecting intensified competition. India is the world's fastest-growing internet services market as a rising middle class increasingly shops online.

 Amazon announced last year it would invest over $5 billion in India, and has recently expanded into online video and grocery shopping in the country.

The fundraising also comes amid speculation Flipkart may be interested in a takeover of smaller rival Snapdeal. Local media have reported SoftBank Group is keen to sell its stake in Snapdeal, India's third-biggest e-commerce player, in exchange for a stake in Flipkart.

For eBay, the deal would see Flipkart acquiring its buyers in India after the close of the transaction. Flipkart will continue to operate as an independent entity.

"We are delighted that Tencent, eBay and Microsoft - all innovation powerhouses - have chosen to partner with us on their India journey," Flipkart's founders Sachin Bansal and Binny Bansal said in a statement.

"This deal reaffirms our resolve to hasten the transformation of commerce in India through technology."

As part of the fundraising, eBay invested $500 million in Flipkart for a stake, according to a separate statement by both companies. eBay will also merge its India operations with Flipkart.

"eBay and Flipkart have also entered into an exclusive agreement in which they will jointly pursue cross-border trade opportunities to make eBay's global inventory accessible to more India consumers," eBay said in a statement.

The companies did not disclose the amounts invested by Microsoft and Tencent.

Prior to the latest round, Flipkart had raised more than $3 billion in funding via 10 rounds, mostly from international investors.

Sachin Bansal and Binny Bansal, two former Amazon employees, launched Flipkart in 2007 and the company's biggest investor is US hedge fund Tiger Global. Others include Accel Partners and Naspers Group.

Earlier this year, Tiger Global appointed Kalyan Krishnamurthy as the chief executive of the 10-year old online marketplace to replace the position held by one of the companys founders.

Industry watchers say the fresh funding may have come at a lower valuation but it is giving an indication of a turnaround under Krishnamurthy.

China's Tencent - which has also participated in this round - owns social messaging app WeChat and has investment in various Indian online companies like Practo and Ibibo.

With over 100 million customers, Flipkart owns fashion retailers Myntra and Jabong, logistics firm Ekart and payments app PhonePe.

The announcement comes at a time when Indian internet companies have seen funding dry up over the last few months as investors focus extensively on profitability and rationalisation of expenses.

Flipkart and Snapdeal, like many other players, continue to report substantial losses as they pump in funds for building logistics infrastructure and marketing blitz.

Flipkart is also believed to be in talks to buy out Snapdeal that has SoftBank as a prominent shareholder. The deal, if it materialises, would mark the biggest acquisition in the Indian e-commerce space.

Gartner Research director Sandy Shen told PTI that although India's ecommerce market is still at an early stage of development, it is seeing signs of consolidation, with scale being a key success factor in the business.

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