In the landmark deal signed between Tencent, Microsoft and eBay, it has managed to raise around $1.4 billion in a round of valuations that pegged it at $11.2 billion. The figure is much lower than the last round which had pegged the company at $15.2 billion, but the figure is significant because it is an increase from $5.6 billion worth shares as marked by the mutual fund shareholders in November 2016.
In a joint statement given by Binny Bansal and Sachin Bansal, they have said that the deal is an endorsement of Flipkart’s tech prowess and innovative mindset and their potential to disrupt traditional markets.
They further added, “It is a resounding acknowledgement that the home-grown tech ecosystem is indeed thriving and succeeding in solving genuine problems in people’s daily lives across all of India.”
This move also cements Kalyan Krishnamurthy’s position as the returning CEO in Flipkart. Krishnamurthy rejoined the company in June last year and it was speculated that his return would bring further funding for the Indian e-commerce startup. Though the news media had written much about the speculated talks of Flipkart with eBay, but the joint deal with Tencent and Microsoft definitely comes as a surprise, especially after how the deal with Walmart did not come through for Flipkart.
As part of the deal, Flipkart has also acquired eBay India and would be managing it as a separate entity. This merger would benefit both the parties as it would help Flipkart sell eBay’s global inventory in the Indian market, and it would give eBay access to Indian products which it could then sell globally.
Interestingly, Tencent which is a Chinese internet technology company providing value-added services and Microsoft which is another technology giant, have pitted themselves against Amazon. This only reflects the evolving role of technology in the eCommerce space. It also further helps reestablish the importance of the Indian subcontinent for the global economy.
Considering the interest of the both the companies in Flipkart, there is another strong signal which has been sent to both investors and general public about the future of eCommerce in India in general, and that of Flipkart in particular.
When the eCommerce boom first hit India, it was speculated that it would wipe away the local kirana stores. Later with the entry of mobile applications like Grofers, Peppertap and other such similar local grocery delivery apps, it was speculated that local delivery mobile apps could be the future of retail.
However, because of the lack of infrastructure and logistics issue, the localised grocery platforms have found it difficult to sustain. Case in point is that of Grofers having had to shut down its operations in nine cities in India in the year 2016. Hence the spotlight has again turned to the eCommerce giants in India which have better infrastructure, though they continue to make losses and fund their marketing and developments efforts through investors.
But the overall picture for the future prospects of the eCommerce industry seems bright according to a KPMG report which predicts that the industry will grow at the rate of 31% year on year till 2020. Also, the current size of the eCommerce industry in India is similar to how China was in the year 2005 and seems to be following the same pattern. The growth is further going to be aided because of increasing internet penetration, rising acceptance of the cashless payments and online transactions, and lack of physical infrastructure in many towns and cities.
The industry in India is going through a phase of maturation and could get further consolidated if the rumoured acquisition of Snapdeal by Flipkart becomes a reality. And if it does then Flipkart would have another giant Softbank Japan backing apart from Tiger Global which has the majority shares in the company.
And it would finally eliminate all the bigger player leaving only Amazon India and Flipkart battling one another for becoming India’s most preferred eCommerce platform.