SUMMARY
The two investment firms are planning to exit Flipkart because they need to return the money to their limited partners
Following the exit, Walmart’s stake in Flipkart will rise to 72% from 67%
Walmart’s plan to buy out Flipkart’s early investors comes shortly after it pumped $1 Bn into PhonePe
Accel and Tiger Global, two of the early investors in ecommerce giant Flipkart, are planning to sell their remaining stake in the company to its parent Walmart. The two VC firms hold a 5% stake in Flipkart. While Accel holds around 1% of the ecommerce major, the remaining 4% is held by Tiger Global.
According to an ET report, Walmart might offer $1.5 Bn to the two VC firms, valuing Flipkart at around $30 Bn, $7.6 Bn less than the valuation during its last funding round.
After the deal, Walmart’s stake in Flipkart will rise to 72%.
The two investment firms are planning to exit Flipkart because they need to return the money to their limited partners or sponsors from funds which are close to their maturity cycles.
Walmart’s plan to buy out Flipkart’s early investors comes shortly after it pumped $1 Bn into fintech major PhonePe through primary and secondary investments, in a move to separate the fintech decacorn from the ecommerce decacorn.
The retail giant is investing over $1 Bn in PhonePe’s ongoing funding round – including secondary share sales – taking the total to $1.5-2 Bn. PhonePe has already raised $350 Mn in the first tranche from General Atlantic at a pre-money valuation of $12 Bn.
Flipkart’s valuation is also getting readjusted to around $33 Bn from $37.6 Bn in 2021 as part of the separation from PhonePe.
Accel & Tiger Global Set For Mega Returns On Early Flipkart Bet
Accel, which started investing in Flipkart with an initial investment of $1 Mn, has invested around $100 Mn so far in the startup founded in 2007. The VC firm is expected to make around $350 Mn on the funding deal, according to the aforementioned report.
Accel also fetched $1 Bn in returns when Walmart bought a majority stake in Flipkart in 2018. Back then, Accel had sold a partial stake to the US-based retail giant.
On the other hand, Tiger Global earned around $2 Bn (at the current dollar rate) when Walmart picked up the stake in the ecommerce startup in 2018. Incidentally, Tiger Global also happens to be fighting a case against Indian tax authorities over a tax demand on the said exit.
Led by Lee Fixel, Tiger Global’s investment cycle in Flipkart is coming to an end with this exit. Fixel was also instrumental in Tiger Global’s investments in other Indian unicorns such as Razorpay, Freshworks, Delhivery, and Ola, among others.
The exit talks are happening at a time when the Indian startup ecosystem is impacted by the funding winter. According to Inc42, ecommerce funding dropped by 62.5% in 2022 compared to 2021, leading many startups to rethink their growth strategies.
However, Walmart’s continued investments in Flipkart and PhonePe express the deep faith that it maintains in its bets in India and the general market environment of the country.
