Flipkart gets US$ 1 bn from Tencent, Microsoft at US$ 11-bn valuation

Flipkart eyes another $500 mn from eBay, which seeks to merge India ops with it and exit business

Bengaluru: India’s largest e-commerce marketplace Flipkart has closed a $1 billion funding round with backing from Chinese Internet giant Tencent and participation from Microsoft, just two months after former Tiger Global executive Kalyan Krishnamurthy took over as CEO of the company.

This latest round of funding brings down the valuation of India’s most highly valued startup to $11 billion from a previous high of $15 billion according to sources close to the development. While the round has been completed, the company has so far not disclosed any details on the investment.

Flipkart declined to comment on “market speculations” citing company policy.

Apart from the $1 billion, Flipkart is also looking at an additional $500 million investment from eBay which is in talks to merge its India entity with the company and exit the business. The investments will give Flipkart the firepower it needs to take on a fast-growing Amazon and also a potential entry into the peer-to-peer e-commerce market. Amazon owns peer to peer marketplace Junglee and has integrated its services on its main platform.

After asserting his dominance in the boardroom earlier this year and pushing for the appointment of key aide Krishnamurthy to the position of CEO, Lee Fixel has not participated in the latest funding round. After sinking over $1 billion into Flipkart, Tiger Global seems to be prepping for an exit from India’s most successful startup according to one of the sources.

Flipkart is engaged in a heated battle with US-based rival Amazon in India which has committed to investing $5 billion into the country over the next few years. Before Krishnamurthy’s arrival at Flipkart in mid-2016, the company suffered nearly 12 months of stalled growth that made investors jittery.

Booking.com INT
In the meantime, Amazon had grabbed a big chunk of the market at the expense of number two Indian rival Snapdeal, burning huge amounts of money on discounting products and rolling out loyalty services such as Prime. Flipkart saw some respite in the festive season sales of 2016, where it is believed to have outperformed Amazon by a large margin.

With Krishnamurthy at the helm of the company, some sense of positivity has returned at Flipkart. The latest round of funding shows the return of investor confidence, with the drop in valuation suggesting a return of sensibility in the market rather than skepticism of the company’s future.

Aliexpress INTSome industry watchers are however seeing this as the second big battle in the war to dominate India’s fast-growing e-commerce market. The entry of Chinese online retail giant Alibaba through a recent $200 million investment in Paytm E-commerce could challenge even Amazon’s seemingly endless supply of cash.

While Flipkart seems to have built up on its war chest with the latest and planned investments, the future of Softbank-backed Snapdeal seems bleak. The company has been struggling to raise funds for itself as well as attract external funding for its digital payments arm Freecharge, despite payments being the hottest sector in India’s startup space right now.

Business Standard: March 21, 2017

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