Flipkart gets $2.5 bn funding boost from SoftBank in fight against Amazon
- Author: Eleanor Harrison Aug 12, 2017,
Aug 12, 2017, 0:17
Flipkart and Amazon's massive reserves of cash have left the pair as the two largest generalist retailers in India, a market with substantial retail ecommerce growth potential.
This investment in Flipkart is a mix of primary and secondary capital.
This is vital ammunition as it seeks to retain its market share lead over Amazon India, which has received capital commitments of $5bn from its United States parent.
SoftBank CEO Masayoshi Son, an ambitious deal-maker, said earlier this week that he would "respect the decision" of Snapdeal's leadership but said he remained "engaged" with Flipkart.
The Japan-based Softbank's Vision Fund has made the largest ever infusion of United States dollars 2.5 billion in India's e-tailer firm. "The challenge is to match Amazon's product offering, which it tweaks every now and then to make it stickier for consumers".
This investment comes weeks after a possible deal between Flipkart and Snapdeal fell through.
Co-founders of Flipkart, Binny Bansal and Sachin Bansal said, "This is a monumental deal for Flipkart and India".
Flipkart, which started by selling books on the Internet in 2007, was struggling to raise money until past year, hobbled by a tough private funding environment and shrinking valuations.
Amazon has also committed around $5 billion in the India since 2014 and is likely to pump in more.
Note here, that the funding has been made via Softbank's Vision Fund, which is worth $100 billion.
"It is impossible for Softbank to now invest in Amazon so they are looking at several smaller companies like Flipkart and Paytm so that atleast a few of them will give them returns like Alibaba did", added Gupta.
"India is a land of vast opportunities".
According to data from Bank of America Merrill Lynch, Flipkart is expected to control a 43% share of retail ecommerce sales in India this year, compared with Amazon's 31%.
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.
Softbank's investment fund, which is now one of Flipkart's biggest shareholders, is also backed by the government of Saudi Arabia, Apple, Qualcomm, and manufacturing heavyweight Foxconn, among others. In April, the firm funneled about $260 million through a subsidiary to the parent company of Ola, India's largest homegrown ride-hailing service.