SUMMARY
The US Based Hedge Fund Tiger Global Made A Partial Exit From Flipkart By Selling A Portion Of Its Stake To SoftBank
Over the course of the last one year, Flipkart has witnessed multiple investor exits, as part of a share buyback organised in the backdrop of SoftBank’s massive $2 Bn-$2.5 Bn investment in the homegrown ecommerce giant.
Among them, the biggest exit was orchestrated by Tiger Global. In November 2017, the US-headquartered hedge fund made a partial exit from the venture, when it sold shares worth over $424 Mn in Flipkart to Japanese investment behemoth SoftBank.
Reports of Tiger Global’s intentions to partially exit Flipkart first surfaced in March 2017, when it initiated talks with SoftBank to “sell a part of its stake in Flipkart in exchange for a merger with Snapdeal”. As per sources, the firm was looking to divest a third of its shares in exchange for $1 Bn from SoftBank.
However in April, when the homegrown startup raised $1.4 Bn funding from Tencent, Microsoft and eBay, Tiger reportedly sold a part of its holding in Flipkart. Later in August, it was reported that a large portion of SoftBank’s $2 Bn-$2.5 Bn investment in Flipkart was actually paid to US-based hedge fund Tiger Global in exchange for one-third of its shares in Flipkart.
In November 2017, after Tiger Global Management Partner Lee Fixel stepped down from the board of its other major Indian bet Ola, fresh reports stated that SoftBank had invited existing early-stage investors of Flipkart as well as its employees to sell their shares for $85-$89 a piece. The share repurchase would have put Flipkart’s valuation at $10 Bn, which is below the ecommerce firm’s current valuation of $11.6 Bn.
As per sources close to the development, SoftBank had agreed to buy the existing investors shares’ worth $1.4 Bn–$2 Bn, when it first made the massive fund infusion of over $2 Bn in Flipkart, post the failure of Snapdeal merger with the ecommerce unicorn.
As per the report by Paper.VC, the second biggest beneficiary of Flipkart’s share buyback offer in 2017 was Erasmic Venture Fund, managed by California-headquartered VC firm Accel Partners. The firm clocked $113.5 Mn through a partial exit from the homebred ecommerce behemoth.
Interestingly, in December 2015, Accel Partners, the then second largest shareholder in Flipkart, had sold a small portion of its stake to Qatar Investment Authority for $100 Mn (about INR 650 Cr). Prior to that, in 2014, the venture firm sold Flipkart’s shares worth more than $80 Mn to undisclosed buyers.
Also in 2015, Helion Venture sold its entire stake of 0.2%, estimated at $22.5 Mn (INR 156 Cr.) in Flipkart. The investment firm had acquired a stake in Flipkart by virtue of its investment in online electronics retailer LetsBuy, which was bought by the ecommerce firm in 2012.
Coming back to the exits made by investors in Flipkart last year, DST Asia and Divesh Makan-founded IONIQ Capital were the third and fourth largest exits at $53.7 Mn and $49.1 Mn, respectively.
Kalaari Capital, which had also earlier sold its stake in Snapdeal to SoftBank in May 2017. The early-stage, tech-focussed investment firm reportedly clocked $4.7 Mn in 2017 as part of Flipkart’s share buyback programme.
According to the report by Paper.VC, funds associated with Russian tech investor Yuri Milner also made partial exits from Flipkart at $50 Mn.
Private equity (PE) and venture capital (VC) exits in India reached a record high of $13.7 Bn across 276 deals in 2017, as per a report by Venture Intelligence. This marked a near 57% jump from the $8.7 Bn registered in the year before that across 268 deals.
Most of these exits have been via open market, secondary share sales and initial public offerings.
As can be inferred from its recent investments, SoftBank is deeply positioning itself in the Indian consumer tech space eyeing maximum control in its four major bets – Flipkart, Ola, Paytm and OYO – thereby building an ecosystem of its own.
Ironically, the Masayoshi Son-led investment behemoth also recently led a massive funding round in global cab aggregator Uber, which incidentally has a major presence in India and directly competes with Ola.
As can be seen in the case of Snapdeal, Indian startups currently stand on a slippery slope, where only the toughest survive. Whether SoftBank will be successful in reaping benefits from his investments in the country remains to be seen.
