Flipkart has raised an estimated $2.5 billion from SoftBank Vision Fund, making the fund created by Japanese conglomerate SoftBank one of the biggest shareholders of India’s largest e-commerce player. “This is the biggest ever private investment in an Indian technology company,” Flipkart said in a statement without disclosing the sum invested. The investment will make the $100 billion Vision Fund one of the largest shareholders in Flipkart, the e-tailer said.
People familiar with the deal said the investment is worth $ 2.5 billion, with about $ 1.5 billion being directly funnelled into Flipkart and $ 1 billion for part of Tiger Global Management’s stake. The SoftBank Vision Fund, the world’s largest technology-focused fund, will get about 20 per cent stake in Flipkart, they said.
The investment, which comes less than two weeks after Snapdeal dropped merger talks with its bigger rival, will swell Flipkart’s cash holdings to more than $ 4 billion. Snapdeal is backed by SoftBank. The investment is part of the financing round announced in April this year where Tiger Global-backed Flipkart had raised $1.4 billion from Tencent, Microsoft and eBay. At that time, Flipkart was valued at $ 11.6 billion.
With the latest funding, Flipkart is estimated to have raised well over $ 5 billion till date. SoftBank was mediating the talks for Snapdeal’s merger with Flipkart. The discussions were terminated after the smaller rival decided to pursue an independent path.
Sources had said SoftBank was keen to pick up stake in Flipkart and was looking at investing about $ 1.5-2 billion.
For Flipkart, the funding provides it with more arsenal to compete with Amazon. The two companies have been locked in an intense battle for leadership in the burgeoning Indian e-commerce market.
“India has a thriving Internet market with close to 500 million Internet users and as per market research, the Indian e-commerce market is expected to grow at a five-year CAGR in excess of 30 per cent,” the statement said.
The funding round further solidifies Flipkart’s balance sheet and will help accelerate investment in driving continued market leadership, it added. Amazon and Flipkart have been pumping in millions of dollars to strengthen infrastructure as well as bring more sellers and buyers online.
While Flipkart has now raised close to $ 4 billion this year, Amazon pumped in about $ 600 million across various units in India since January this year. “This is a monumental deal for Flipkart and India. Very few economies globally attract such overwhelming interest from top-tier investors,” Flipkart co-founders Binny Bansal and Sachin Bansal said.
Masayoshi Son, founder, Chairman and CEO of SoftBank Group Corp, said India is a land of vast opportunity.
“We want to support innovative companies that are clear winners in India because they are best positioned to leverage technology and help people lead better lives. As the pioneers in Indian e-commerce, Flipkart is doing that every day,” he added.
SoftBank, which has investments in Indian start-ups like Snapdeal and cab aggregator Ola, had committed investments worth $ 10 billion in India in 2014. In May this year, SoftBank pumped in $ 1.4 billion (over Rs 9,079 crore) in Indian digital payments platform Paytm.
SoftBank Vision Fund, founded by Son, has participants like Apple, Foxconn and Public Investment Fund of the Kingdom of Saudi Arabia. While reporting its financial results for June quarter, SoftBank had included the Fund as a new reportable segment.
The completion of the investment in Flipkart is subject to customary regulatory approvals and closing conditions. Goldman Sachs & Co. LLC served as financial advisor and Gunderson Dettmer LLP served as legal advisor to Flipkart.
Citi served as financial advisor and AZB and Partners served as legal advisor to the SoftBank Vision Fund.