Sale of The Year: Amazon Bids for Flipkart Now
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The startup ecosystem in India has been on its toes for quite some time now, with the biggest news waiting to break out – the buyout of Flipkart. And like a typical soap opera, this story is not one devoid of twists.
While news about Walmart-Flipkart deal had put rumours to rest, a former bidder has resurfaced. According to reports, Amazon.com Inc has gone out and offered to buy a 60 per cent stake in Flipkart.
One of India’s biggest success stories, Flipkart’s journey over 11 years has been an inspiration to many others, if not all. The e-commerce giant has even made global competitors like Amazon and Walmart stand up and take notice of it. And now the two companies – Amazon and Walmart – are bidding to buyout Flipkart.
Amazon Vs Walmart Now
Conflicting reports say that while Amazon could buy 60 per cent stake in Flipkart, Walmart reportedly will take over 55 per cent. This will subsequently value the Indian e-commerce company at $21 billion. The Indian ecommerce industry is tipped to grow to $200 billion in a decade and the acquisition of Flipkart will play a major role in the same.
Walmart had also completed its due diligence to complete the buyout. Reports also suggested that Walmart would take up 4 out 10 seats in Flipkart’s board if it went ahead with the sale.
The move from Amazon is not surprising as it was anticipated by most in the ecosystem. And this move is being favoured by one of Flipkart’s biggest investors – Softbank. The Japanese investor which invested only last year in the Indian e-commerce retail giant, has been rooting for Amazon’s offer as opposed to Walmart’s. Amazon with its prowess in online commerce could uplift Flipkart’s frailing aspects while securing the global giant’s stronghold in the country, whereas for Walmart the acquisition of Flipkart will be a boost for Walmart in itself. Softbank, which is also a majority investor in the Indian payments platform PayTM, had also earlier hoped for a merger between PayTM and Flipkart.
The Flipkart Story
Founded in 2007 by Sachin Bansal and Binny Bansal, Flipkart is definitely India’s sweet startup success story, albeit with its own highs and lows. Currently valued at $20 billion, Flipkart had started as DigiFlip which sold USBs, laptop bags etc. Over the years, it has evolved to be the go-to name for Indian e-commerce. It also acquired its rivals Myntra , Jabong and eBay in order to toughen up on its race against rival Amazon.
But Flipkart’s finances had also been dwindling. In February 2016, days after Flipkart claimed it was valued at a whopping $15.2 billion, Morgan Stanley marked down its stake to a $103.97 a share. This was below the price of its last fundraising round. According to reports, Flipkart had declared a loss of $1.3 Bn (INR 8,771 Cr) in FY17.
Will the Regulations Allow This?
The Amazon-Flipkart merger could be an exciting one but the Competition Commission of India has a few concerns. The two e-commerce companies together control about 90 per cent of the industry in India and a merger would not go down well with the CCI. The two competing entities if merged will take control of the market. However, a possibility of a merger still lies alive if Amazon lowers its buyout percentage in Flipkart.