Flipkart raises $1 billion and then buys eBay India

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Today is a good day for Flipkart. The company announced two major pieces of news that have rocked the massive Indian ecommerce industry. The first was that it raised $1.4 billion in a new funding round, which has put its post-money valuation at $11.6 billion. The purpose of this funding round was to battle like the likes of Alibaba and Amazon. This funding round includes a few major names like China’s Tencent, Microsoft, and eBay. Additionally, as a part of this deal, Flipkart will also be acquiring eBay India.

In other words, eBay will by selling its Indian counterpart and making a cash investment in exchange for a stake in Flipkart. Despite this sale, eBay India will continue to operate as an independent entity under the Flipkart umbrella. As per this deal, Flipkart and eBay have inked a strategic agreement that would help cross-promote products between services. This gives eBay sellers a chance to reach consumers in India and similarly sellers on Flipkart better access to a global consumer base.

Flipkart raises $1 billion and buys eBay India
Thoughts from the founders of Flipkart regarding their latest investment round (Image credits: Flipkart)

Of course, not everything is rosy for Flipkart. This was indeed the largest round of financing for an Indian tech startup. However, the valuation of the company has come down from $15 billion from its previous round of funding to $11 billion today. Furthermore, the company is recovering from a rough 2016, which saw it facing a host of problems from intense competition with Amazon to laying off employees. All this resulted in former Tiger Global executive Kalyan Krishnamurthy becoming the new CEO of Flipkart in January.

Nonetheless, with this latest round of funding, Flipkart has gained some powerful allies in its battles against Amazon and Alibaba to conquer the Indian e-commerce market. And it will likely need them as the competition is only set to increase in the near future. This is because India is expected to have 465 million people online by June 2017. By 2020 its e-commerce market is set to be worth $48 billion despite hitting a road block due to its recent demonetization initiative.

Amazon has pledged to invest $5 billion in its bid to conquer the Indian ecommerce market (Image credits:  Forbes)
Amazon has pledged to invest $5 billion in its bid to conquer the Indian ecommerce market (Image credits: Forbes)

As such, Amazon has pledged to invest $5 billion into its Indian operations over the next few years. Similarly, Alibaba is betting big by backing both the payment platform Paytm and Snapdeal, which is Flipkart’s biggest homegrown competitor. Yet, there is also speculation that Snapdeal and Flipkart would merge in an attempt to help combat Amazon and help Snapdeal get back on its feet after severe struggles that saw over 500 employees laid off.

Yet, that merger is still under speculation. What is clear now is that the battle for the Indian ecommerce market is going to get even more intense. This new round of investment and acquisition of eBay India has put Flipkart in a strong position. This is despite its lower valuation in comparison to its previous funding round. Nonetheless, it still faces a long uphill battle in the fiercely competitive Indian ecommerce market. Who will be the ultimate winner in this fierce battle? That’s something only time will tell as the battle between these ecommerce giants heats up.

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