Flipkart acquires eBay India biz; raises a whopping $1.4bn from Tencent, eBay & Microsoft

Marking the biggest investment till date in the Indian Internet sector, Flipkart has raised a whopping $1.4bn from Tencent, eBay and Microsoft in its latest and 11th funding round. As per a company statement the latest investment was done at a post-transaction valuation of $11.6bn.

The rumors about this latest round of funding surfaced last week.

This fundraising round also witnessed participation from existing backers, Tiger Global Management, Naspers Group, Accel Partners and DST Global. The last investment of $700mn came in July, 2015 from Tiger Global and Qatar Investment Authority.

Sachin Bansal and Binny Bansal, founders of Flipkart said, “This is a landmark deal for Flipkart and for India as it endorses our tech prowess, our innovative mindset and the potential we have to disrupt traditional markets.”

Another interesting development alongside the funding is that while eBay is making a cash investment in Flipkart in exchange for an equity stake, it is also selling selling its eBay.in business to Flipkart. This is the 12th acquisition of Flipkart after the acquisition of Jabong and PhonePe last year.

Tencent will join Flipkart as a strategic investor bringing experience in linking social networking and e-commerce.

Martin Lau, Tencent President said, “This strategic partnership enables Tencent to participate in the exciting opportunities in ecommerce and payments in India. We look forward to helping Flipkart to deliver compelling experiences to users throughout India, and to contribute to the development of the internet ecosystem there.”

eBay, however, will continue to operate as an independent entity as a part of Flipkart and has entered into a strategic commercial agreement with Flipkart. A cross-border trade agreement between the two will make the eBay's global inventory accessible to Flipkart customers. Similarly, eBay’s customers will also have access the inventory of Flipkart sellers and the sellers on Flipkart will get an opportunity to sell globally.

Devin Wenig, President and CEO of eBay Inc said, “The combination of eBay’s position as a leading global ecommerce company and Flipkart’s market stature will allow us to accelerate and maximise the opportunity for both companies in India.”

Commenting on the latest funding round, Sandy Shen, Research Director, Gartner, said, "This is good news for Flipkart as it solidifies it as a market leader at least in the short term, keeping competition especially Amazon at bay. It is interesting to note that this round sees the investment from strategic investors that will bring technology and market expertise that Flipkart earnestly needs, in contrast to the previous round of mostly financial investors."

However, the next challenge is to strategize the path to a sustainable business model said he.