Flipkart got billions to afford more Billion Day sales for you

Jon Howard
August 12, 2017

SoftBank's investment, via its $100-billion Vision Fund, makes it the largest shareholder in Flipkart, displacing Tiger Global, which is likely to make a partial exit following the deal. Those investments have come both through the company itself, as well as the SoftBank Vision Fund, an investment fund that also includes partners such as another fund operated by Saudi Arabia's government.

It is not immediately clear whether SoftBank has infused the $2.5 billion into Flipkart alone or some of this will go to private equity player Tiger Global in return for a stake.

This may trigger some changes at the top level.

Another leading investor Ravi Gururaj was of the view that the recent funding has just made things hard for the other global players such as Rakuten, Walmart and Alibaba to make a roadway in the Indian e-commerce market.

After this round, Flipkart will have in excess of $4 billion of cash on the balance sheet. Between them, Flipkart and Snapdeal account for more than 50% of the Indian online shopping market, though Amazon India is a growing rival. "SoftBank's proven track record of partnering with transformative technology leaders has earned it the reputation of being a visionary investor", the co-founders said in the statement. Flipkart not only managed to bypass Snapdeal, it also managed to clinch capital and the strategic backing of SoftBank. The remaining $1.5 billion would be invested in the company.

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"India is a land of vast opportunities", Son said in a statement on Thursday. We want to support innovative companies because they are best positioned to leverage technology.

The move is interesting because in 2011, Flipkart wanted to rope in SoftBank as an investor, which would have cost Masayoshi Son, founder and chairman & CEO of SoftBank Group Corp, a few hundred million, rather than billions, for a similar stake.

An acquisition in these verticals will solve the difficulty of building a supply chain for these specialised categories, "To match up, Flipkart will have to invest at least as much as Amazon, and grocery will be important to increase wallet share", said Satish Meena, senior forecast analyst at Forrester. This is the highest amount raised by any start-up in India, and among the highest globally. Flipkart reported a net loss of Rs 2,306 crore for the year to March 31, 2016, on revenues of about Rs 1,952 crore.

This was especially significant as Flipkart is competing against the cash-rich Amazon.

Amazon has been tightening its grip on the Indian market with its almost-infinite warchest, and cutting-edge technology.

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