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Flipkart Acquires eBay India, Raises $1.4 Billion In Funds

The company will have a valuation of $11.6 billion after the latest round of fundraising, which is is its biggest ever, Flipkart said.
Flipkart Acquires eBay India, Raises $1.4 Billion In Funds
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Indian e-commerce giant Flipkart has raised $1.4 billion from Tencent Holdings Ltd, Microsoft Corp and eBay Inc, amid brewing rumors of the company taking over its close rival Snapdeal.

The company will have a valuation of $11.6 billion after the latest round of fundraising, which is its biggest ever, Flipkart said in a statement.

As part of the fundraising, eBay invested $500 million in Flipkart for a stake. In exchange, the two companies will merge their operations in India and Flipkart will own and operate eBay's business in the South Asian countries when the deal closes later this year.

Flipkart and eBay have also signed an exclusive cross-border trade agreement, as a result of which customers of Flipkart will gain access to the wide array of global inventory on eBay. In return, eBay’s customers will have access to unique Indian stock provided by Flipkart sellers. Thus, dealers on Flipkart will now have an opportunity to expand their sales globally. 

Speculations Rife Over Flipkart’s Plans To Take Over Snapdeal

Flipkart’s deal with eBay has raised serious speculations on whether the Indian e-commerce giant would still be pursuing Snapdeal for a possible takeover. The touted take over is expected to save e-tailing from its lukewarm growth rate.

A detailed report by RedSeer Consulting, revealed that industry size during the January-March quarter this year just reached $14.7 billion — barely 5 per cent higher than $14 billion observed during the same period, last year.

Extracting synergies and value from this acquisition would be a challenging task for Flipkart, considering the differences — dissimilar strategies and different team culture and work environment of the two companies. However, if the post-merger integration is executed successfully, the deal could be as successful as the Ola/TFS acquisition in online taxi space. The pact gave Ola financial firepower and capability to hold off Uber in India. The deal would help Flipkart fend off Amazon for long, Anil Kumar, CEO, RedSeer Consulting said.

Ways By Which Flipkart Can Benefit From Snapdeal?

If Flipkart acquires Snapdeal, its position against Amazon India will be strengthened. Amazon’s successful India strategy has forced local players to take stern measures like reshuffling the management, re-aligning various strategies, initiating job cuts and mergers. Flipkart had earlier bought Myntra and Jabong to strengthen its position in the fashion segment.

Data formulated by research firm Tracxn explains the spike in funding in the ecommerce domain between 2014 and 2015 and the subsequent dip in 2016.

Year

Deals

Funding (In $M)

2010

6

26.8

2011

32

233.4

2012

45

297

2013

48

625.3

2014

49

3110

2015

100

2740

2016

102

938.8

2017 (till March)

13

1240

Source: Tracxn

“Indian ecommerce market is likely to be dominated by Flipkart, Amazon and Alibaba. By taking in Snapdeal, Flipkart would not just add customers and business to itself, it would also extract the best bet available to its global competitors in the Indian ecommerce market. This will surely help Flipkart stand up to its global rivals much stronger than before,” Fazal Ahad, co-founder and director at Merisis Advisors told the Entrepreneur India.

The deal, according to experts, will help Flipkart establish a well-connected supply network, facilitate small yet substantial increase in customer base and provide access to a large investor like Softbank and to Snapdeal’s exclusive line of tie-ups.

With the eBay-Flipkart merger emerging into the picture, it would be interesting to observe the price tag and the buyer interest that Snapdeal would ask for in the coming days.

 
Edition: May 2017

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