SoftBank has given an indication to continue on its plans to invest in ecommerce firm Flipkart. Reportedly, the Japanese conglomerate will do the investment through its $100 Bn Vision Fund. The investment talks first began when SoftBank started pushing in for Snapdeal Flipkart merger deal earlier this year. With this funding, SoftBank is reportedly eyeing the stake of Tiger Global in Flipkart.
Initially, the investment was supposed to be a part of the Snapdeal-Flipkart deal, wherein it was expected that some of the existing Snapdeal investors will take an exit. Since the deal has been called off now, the industry pundits were speculating the status of Flipkart investment proposal by SoftBank.
As stated by sources close to the development, although Masayoshi Son was expecting the merger deal to happen and get a stake in Flipkart, “the Vision Fund’s planned investment is not dependent on a deal between Snapdeal and Flipkart.”
As per another media source, the Japanese conglomerate might invest between $1.5-2 Bn in home-grown ecommerce poster boy. Earlier this month, Inc42 also reported that Flipkart is looking to raise $500 Mn funding from SoftBank as a primary fund. Sources revealed that the remaining amount will be paid to US-based hedge fund Tiger Global in exchange for one-third of its shares in Flipkart. At present, Tiger Global holds around 28% stake in the ecommerce platform.
An email sent to Flipkart, and SoftBank corporate communication teams did not elicit any response till the time of publication
SoftBank Vision Fund: Envisaged To Increase Investment In India
SoftBank Vision Fund is an $100 Bn fund to invest in tech companies globally. In May 2017, the Japanese conglomerate announced the first close of the Vision Fund. As of now, $93 Bn has been poured in, with an aim to raise the corpus to $100 Bn by the end of this year.
SVF aims to invest in sectors such as IoT, AI, robotics and others with a ticket size between $100 Mn-$500 Mn.
As earlier reported by Inc42, SoftBank’s Indian investments will be driven through this $100 Bn fund. The company first announced its intentions to invest $10 Bn in Indian tech firms in October 2014 and later, in December 2016, Son also predicted that the amount will surpass $10 Bn in the coming years.
To date, SoftBank has infused over $3.5 Bn has in Indian consumer Internet and tech companies like OYO, Grofers, Housing, InMobi, Snapdeal and Ola. Recently, SoftBank reportedly fuelled in $250 Mn in OYO and $1.4 Bn in Paytm. To steer Ola towards profitability, SoftBank recently floated plans to turn Ola into an electric car manufacturer. Also, in November 2016, Ola had secured $260 Mn (INR 1,675 Cr) from SoftBank Group.
What Softbank Funding Means For Flipkart And Tiger Global
Flipkart has already lost its bet on Snapdeal, which means that a potential competition still exists in the ecommerce space. Amazon is already gearing up to get the top spot with an aggressive burnout of capital in Indian consumer internet segment. Amazon India is almost going head-to head with Flipkart and is entering almost all segments where Flipkart is trying to expand be it digital payments, grocery or fashion. Also, Alibaba is all set to push in Paytm Ecommerce as a third contender in the ecommerce battle (now that Snapdeal is out for a while).
Now, if Flipkart accepts the $2 Bn funding round from SoftBank, it will get enough capital to survive in the Indian ecommerce heat zone in the long run.
However, on the other hand, with SoftBank intentions to buy the stake of Tiger Global Management, Flipkart has to let go one of its oldest investors. To point out, it was Tiger Global Management only with whose efforts Flipkart was able to get out of its failure zone in late 2016.
It was only after the appointment of Kalyan Krishnamurthy in January 2017, that Flipkart received the much-needed boost of $1.4 Bn funding and was able to close acquisition deal with eBay.in. Certainly, letting Tiger Global Management of the Flipkart Board will be a tough decision.
Furthermore, the aggressiveness with which SoftBank has pushed in Snapdeal Flipkart merger deal, it has threatened many of its investee companies. For instance, as per recent media reports, Cab aggregator Ola is trying to raise funds from Tencent and dilute SoftBank shareholding in the company. SoftBank currently holds over 40% stake in the company. Prior to that, Ola also made changes in its shareholding terms, restricting the purchase of its shares by investors without founders’ consent.
Will SoftBank be able to close the deal with Flipkart through its Vision Fund? If Yes, then at what terms and how will it affect the Indian consumer Internet ecosystem going forward? These are few questions which are still making the industry pundits keep on speculating. All we can do is just wait and watch!