Flipkart can now up the ante in high-stakes battle against Amazon India

Electronic commerce company Flipkart has raised an estimatedUSD 2.5 billion from SoftBank Vision Fund, making the fundcreated by Japanese conglomerate SoftBank one of the biggestshareholders of India's largest e-commerce player.

"This is the biggest ever private investment in an Indiantechnology company," Flipkart said in a statement without disclosing the sum invested.   

The investment will make the USD 100 billion Vision Fundone of the largest shareholders in Flipkart, the e-tailer said.

Flipkart can now up the ante in the high-stakes battle against Amazon India in what is probably the world’s fastest growing e-commerce market.

While Amazon’s Jeff Bezos has committed $5 billion to the Indian business, Flipkart now has $4 billion in the bank after Japanese investor SoftBank’s infusion of close to $2.5 billion. In April, Flipkart raised $1.4 billion from Tencent, eBay and Microsoft at a valuation of $11.6 billion.

People familiar with the deal said the investment is worth USD 2.5 billion, with about USD 1.5 billion being directly funnelled into Flipkart and USD 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 inFlipkart, they said.     

The investment, which comes less than two weeks after Snapdeal dropped merger talks with its bigger rival, willswell Flipkart's cash holdings to more than USD 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 USD 1.4 billion from Tencent, Microsoft and eBay. At that time, Flipkart was valued at USD 11.6 billion. With the latest funding, Flipkart is estimated to have raised well over USD 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 USD 1.5-2 billion.   

For Flipkart, the funding provides it with more arsenalto compete with Amazon. The two companies have been locked inan 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 inexcess of 30 per cent," the statement said.

The funding round further solidifies Flipkart's balancesheet 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 USD 4 billion this year, Amazon pumped in about USD 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 over whelming interest fromtop-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 lever age technology and help people lead better lives. As the pioneersin 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 USD 10 billion in India in 2014. In May this year, SoftBank pumped in USD 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 Kingdomof Saudi Arabia.

While reporting its financial results fo rJune 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. 

With PTI Input