Sources close to the development told ET that the funding is part of a larger $2 billion round which could see the participation of a group of sovereign wealth funds like Abu Dhabi’s ADQ, Canada’s CPPIB, as well as the company’s existing investors such as GIC and Qatar Investment Authority.
The transaction is likely to value the Bengaluru-based firm at $25-30 billion, sources said.
“The talks have been ongoing with SoftBank and the final contours of the deal will be drawn up in the next few weeks,” said a person close to the developments.
Significantly, if the SoftBank capital comes in, it could lead to Flipkart pushing back its plan for a US public market listing, said the person. “This will mean that Flipkart will stay on as a private company for longer than what was being earlier talked about.”
The company has been preparing to go public by early next year, as reported earlier.
ET had reported on May 11 that the Canada Pension Plan Investment Board (CPPIB) is expected to join the fundraise along with existing backers such as GIC of Singapore and Qatar Investment Authority.
If the deal materialises, it will be yet another big move by the Masayoshi Son-founded SoftBank in India’s e-commerce market which it has reordered with massive cash infusions. In 2017, SoftBank tried orchestrating a merger between its portfolio firm Snapdeal and rival Flipkart, but the deal was scuppered largely because of opposition from Snapdeal. The conglomerate went ahead to back Flipkart, only to sell its entire 21% holding to Walmart a year later for about $4 billion when the Bentonville-headquartered retail behemoth bought a 77% stake in the Indian etailer.
SoftBank had earlier invested $2.5 billion in Flipkart before its 2018 exit. Its possible reentry into the online retailer comes at a time when large Indian groups like
Industries and Tata have sought to capture market share in the fast-growing consumer internet sector, and intend to deploy huge amounts of capital to prop up their digital businesses.
Flipkart’s traditional rival Amazon too has been relentlessly chasing the India market, having invested more than $7 billion in the country and diversified from etailing to online payments, streaming, food delivery, with more to come.
Queries sent to spokespersons at Flipkart and SoftBank remained unanswered as of publishing this story.
In July last year, Walmart had led a $1.2 billion investment in Flipkart Group, valuing the company at $24.9 billion, about 19% higher than when it bought a majority stake in the retailer. The backing from Walmart had coincided with Mukesh Ambani-led Jio Platforms amassing $15 billion from myriad investors, including Facebook, Google, and private equity firms such as Silver Lake and KKR.
With the last tranche of funding and the possible new round which involves SoftBank, Flipkart is pushing to build an ecosystem in order to compete with Amazon, Reliance and the Tata Group. While it leads in fashion ecommerce with Myntra, the online retailer is yet to create large platforms beyond pure-play retail, something which is becoming vital as large conglomerates enter the digital space. Online payments player PhonePe, which was a part of the Flipkart group, was spun off from the ecommerce company last year.
Over the past two years, Flipkart, under the leadership of its chief executive Kalyan Krishnamurthy, has ramped up investments and acquisitions to bulk up its supply chain, logistics, and enhance its fashion and brand portfolio, especially on the offline side.
In April, the online retailer acquired Cleartrip to strengthen its presence in the travel and hotel booking space. Last year, Flipkart invested Rs 1,500 crore to pick up nearly 8% stake in brick-and-mortar fashion retailer Aditya Birla Fashion and Retail Ltd (ABFRL) and also bought a 27% stake in Arvind Fashions’ subsidiary Arvind Youth Brands.
Other recent investments include Shadowfax, a logistics startup and Ninjacart, a fresh produce supply chain company. ET reported on May 19 that Rishi Vasudev, a vetaran fashion retail executive who previously headed Flipkart’s fashion business, is raising new capital for his Thrasio-style venture from the ecommerce firm’s venture fund.
Thrasio is a US-based startup that acquires third-party brands sold on Amazon along with other direct-to-consumer ecommerce brands.
Online grocery retail, which has taken centre stage for online retailers in the past year due to the pandemic-induced demand for essentials, is an area which Flipkart is finally looking to push and may invest heavily in. It is dominated by the likes of BigBasket, now majority owned by Tata Digital, as well as SoftBank-backed Grofers and Amazon.
Flipkart’s Supermart has lagged as it relied heavily on smartphone, electronics and fashion over the years to clock higher gross merchandise value, or GMV, in e-commerce parlance. But in the past few months, the company has announced that it is adding significant infrastructure to build warehouses and fulfilment centres for grocery.
Last month it said it was scaling up its infrastructure to be able to service 73,000 grocery orders per day compared with around 64,000 orders recently. It hired 23,000 additional workers during March-May 2021 for warehouse and delivery roles to meet the increased demand of essentials online. While states are relaxing guidelines for online shopping as the second wave ebbs, consumers are largely placing orders for grocery and other essentials.
Flipkart operates its India business through multiple entities but Flipkart Internet, which runs the online marketplace, and Flipkart India, the wholesale arm, are central to its operations.
For the financial year 2020, Flipkart Internet saw its losses go up by a little over 19% to Rs 1,937 crore, according to regulatory filings. Its revenue, which comes from marketplace fees and logistics services, jumped 32% to Rs 6,318 crore for the same period compared with a year ago.
Flipkart India cut its losses by 18% to Rs 3,150 crore during the same period while revenues grew around 12% to Rs 34,610 crore. In comparison, Amazon Seller Services, which runs the e-tailer’s India marketplace, registered a 42% growth in revenue to Rs 11,028 crore for FY20 while it incurred a 3% higher loss at Rs 5,849 crore for the same year.
Amazon Wholesale India, the B2B (business-to-business) arm, registered a 70% drop in revenue at Rs 3,388 crore during this period with a 5% decrease in losses at Rs 133 crore during the same fiscal.