Softbank's Vision Fund invests in Flipkart, becomes largest shareholder in the firm
Softbank will get an entry into largest domestic player in Indian e-commerce with this investment and get to play against Jeff Bezos owned Amazon, which is investing billions in the country.
In a bid capture the Indian e-commerce market, Japan’s SoftBank on Thursday announced a massive infusion of funds in Bangalore based Flipkart via its USD 100 billion Vision Fund. The investment estimated to be over USD 2-2.5 billion will be a mix of primary and secondary capital from SoftBank's Vision Fund.
As a result, SoftBank will now become the largest shareholder in Flipkart, just days after Snapdeal founders decided to terminate merger talks with the Bangalore-based company.
After this financing round, Flipkart claimed that it will have in excess of $4 billion of cash on balance sheet.
Welcoming the investment, co-founder Binny Bansal tweeted: “Excited to welcome Softbank Vision Fund as a long-term partner in @Flipkart!A true recognition of India’s potential.”
The investment is part of Flipkart's recent fund raise when it raised USD 1.4 billion from Tencent, eBay and Microsoft.
Key Takeaways from Softbank's Investment:
# Softbank gets a market entry into largest domestic player in e-commerce in India
# Masayoshi Son will get to play against Jeff Bezos to capture the Indian online retail market
# It also means that Flipkart has got a fresh lease of life with a massive VC backing it. Will help in attracting talent.
# The deal also signifies that in future - A consortium of Alibaba-Softbank-Flipkart-eBay-Paytm could join hands to put up a joint fight against Amazon in India
# It also means that the upcoming Diwali will see a lot of discounts from both Amazon and Flipkart.
# E-commerce could again become a revenue churner for Ad companies, logistics players and media firms as they were in 2014-15.
(Flipkart's funding so far, prior to Softbank's entry. Data source: Tracxn.)
Tiger Global, the hedge fund that had invested in Flipkart early on, is expected to have received a partial exit following this investment. There wasn't any further detail on it immediately.
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 compound annual growth rate in excess of 30 percent.
“This is a monumental deal for Flipkart and India. Very few economies globally attract such overwhelming interest from top-tier investors. We’re excited to welcome the Vision Fund as a long-term partner as we continue to build our business with a focus on serving the needs of all Indians,” said Binny Bansal and Sachin Bansal, co-founders of Flipkart.
As a leading innovator in Indian e-commerce, the funding round further solidifies Flipkart’s balance sheet and will help accelerate investment in driving continued market leadership.
'Want to support clear winners'
“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,” said Masayoshi Son, founder and chairman and chief executive of SoftBank Group Corp.
In a statement, last week, Softbank had said that it respected Snapdeal's decision to pursue an independent strategy and not merge into its arch rival Flipkart.
SoftBank has an India portfolio spanning e-commerce, ride sharing, digital payments, hospitality, clean energy and telecommunications, which is valued at over USD 6 billion.
The completion of this investment 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 & Partners served as legal advisor to the SoftBank Vision Fund.Read also: Big forces at play: SoftBank’s Son can emerge biggest rival to Amazon’s Bezos in India