SoftBank invests $2.5b in India's Flipkart
Japanese technology conglomerate SoftBank Group has invested $2.5 billion in Indian e-commerce giant Flipkart through the acquisition of primary and secondary shares.
The investment is an extension of the $1.4 billion round raised earlier this year from Microsoft, eBay and China’s Tencent Holdings, according to a statement. It represents the largest-ever private investment in an Indian technology company and makes the SoftBank Vision Fund – the group’s global technology fund that reached a first close of $93 billion earlier this year – one of Flipkart’s largest shareholders.
Flipkart did not disclose details about the structure of the investment, but a report by the Press Trust of India said SoftBank invested $1.5 billion directly into Flipkart and paid $1 billion to Tiger Global Management for part of its stake. The deal will give SoftBank a 20% stake in the company and leave Tiger with about 18%. Additional shareholders include Accel Partners and South African internet conglomerate Naspers, which together hold about 20%.
“SoftBank’s proven track record of partnering with transformative technology leaders has earned it the reputation of being a visionary investor. We’re excited to welcome the Vision Fund as a long-term partner as we continue to build our business with a focus on serving the needs of all Indians, and driving the next phase of technology adoption in India,” said Flipkart co-founders Sachin Bansal and Binny Bansal.
SoftBank was widely reported to be in talks for a stake in Flipkart following the collapse of negotiations for a merger between Flipkart and its smaller rival Snapdeal. Early stages of negotiations regarding the merger were marked by disputes among investors over the company’s valuation. Ultimately Snapdeal founders Kunal Bahl and Rohit Bansal succeeded in blocking the deal, citing overly restrictive requirements imposed by Flipkart.
As one of Snapdeal’s biggest investors, SoftBank was said to be the driving force behind the merger, seen as the best chance for investors to secure a return from the struggling company. SoftBank has marked down Snapdeal several times over the last year.
Flipkart also suffered a series of markdowns last year by US-based mutual funds including Fidelity, Morgan Stanley and T. Rowe Price. The investment earlier this year valued the company at $11.6 billion, down from $15 billion as of its previous round.
Flipkart has weathered setbacks in recent years beyond the valuation cuts, with several senior executives departing and the company changing CEOs twice since January 2016. However, more recent events such as the installation of Kalyan Krishnamurthy, a former managing director at Tiger, as CEO, have boosted investor confidence.
As part of the earlier round Flipkart also agreed to buy eBay’s India business, which will operate as an independent brand within Flipkart. The move is seen as significantly strengthening the company's hand against homegrown rivals as well as US-based Amazon.
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