Flipkart offers stake to eBay for $500 mn, to keep Amazon at bay

Flipkart online shopE-commerce major eBay Inc. today announced that it will pick up a stake in Flipkart for $500 million in cash.

The US-based online retail company, which will also sell its India business, did not reveal the size of the equity in Flipkart. Tencent and Microsoft are the other investors, Flipkart said on Monday. The total investment raised by Flipkart from Tencent, eBay and Microsoft is $1.4 billion.

The latest funding round, at a post-transaction valuation of $11.6 billion, is the largest in Flipkart’s 10-year history as well as in the Indian internet sector and comes as Flipkart gears up to drive the next phase of e-commerce growth in India, a company statement said.

This investment adds to an existing group of investors that include Tiger Global Management, Naspers Group, Accel Partners and DST Global.

eBay Inc. will sell its eBay.in business to Flipkart. eBay and Flipkart have entered into an agreement to pursue cross-border trade opportunities to make eBay’s inventory accessible to more India consumers, while eBay’s millions of active buyers globally will have access to more Indian inventory provided by Flipkart.

Flipkart will acquire eBay’s buyers in India. eBay does not expect this transaction to have a material impact on its guidance provided on January 25, 2017.

“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 of eBay Inc.

“This is good news for Flipkart as it solidifies it as a market leader at least in the short term, keeping competition especially Amazon at bay. It is interesting to note that this round sees the investment from strategic investors that will bring technology and market expertise that Flipkart earnestly needs, in contrast to the previous round of mostly financial investors,” said Sandy Shen, research director at Gartner.

Though India’s e-commerce market is at an early stage, the market is seeing signs of consolidation as scale is a key success factor in the business.

“This partnership between Flipkart and eBay is the coming together of two pioneering innovators who have disrupted commerce by applying technology,” said Binny Bansal, group CEO of Flipkart.

Gartner said Flipkart will continue to make acquisitions to increase scale, and the next challenge is to strategize the path to a sustainable business model within a set time frame.

E-commerce company Amazon.in last week said it made investment in 9 Fulfilment Centres (FCs) and 33 Delivery Stations exclusively for furniture and large appliances.

Amazon.in has opened the new FCs in 9 states — Karnataka, Haryana, Telangana, West Bengal, Uttar Pradesh, Tamil Nadu, Punjab, Gujarat and Maharashtra — to cater to the demand for large appliances and furniture across the country.

Amazon.in has 34 FCs across 10 states in India, covering an area of over 3 million square feet with a storage capacity close to 10 million cubic feet.

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