Investment Dollars Pour into India's Ecommerce Sector

12 August, 2017, 00:13 | Author: Regina Lloyd

Japanese telecom and investment giant Softbank just made sure Flipkart has plenty of cash to fight off Amazon's aggressive push into India.

Flipkart and Amazon's massive reserves of cash have left the pair as the two largest generalist retailers in India, a market with substantial retail ecommerce growth potential.

After the new investment, Flipkart will have more than United States dollars 4 billion cash reserve which may allow the e-commerce giant to expand its consumer base by offering mega discounts through its periodic sales. The investment is part of the previous announcement by SoftBank to capture 20% stake in both Flipkart and Paytm in India.

For almost two years, the battle for dominance in e-commerce was a three-way race between Flipkart, Amazon and Snapdeal.

The fresh funds for Flipkart come at a time when the company is scripting a revival in the face of rapid advances by Amazon, which has committed an investment of $5 billion in India.

According to investors and experts in the e-commerce ecosystem, the funding by Softbank in Flipkart paves way for a bigger consolidation and that India will not see a monopoly in the e-commerce market unlike China and the US.

Softbank may have missed out on getting a piece of Flipkart when the much anticipated Flipkart Snapdeal merger fell through last month. Armed with a foreign direct investment approval, Amazon is expected to make a splash in the food segment while Flipkart is likely to focus on fashion where it has an edge.

Flipkart, which started by selling books on the Internet in 2007, was struggling to raise money until past year, hobbled by a tough private funding environment and shrinking valuations. SoftBank's $20 million investment in Alibaba at the beginning of this decade is worth $100 billion now.

"India is a land of vast opportunity. As the pioneer in Indian e-commerce, Flipkart is doing that every day", SoftBank founder Masayoshi Son said in a statement. But its efforts were thwarted after the founders of Snapdeal -Kunal Bahl and Rohit Bansal - resolved to stay independent.

Goldman Sachs and Citi advised Flipkart and SoftBank Vision Fund, respectively on the investment deal. On Thursday, SoftBank announced that it has invested close to $2.5 billion in the company. "Harish HV, partner, Grant Thorton, believes the infusion is a vote of confidence for the Indian e-commerce industry".

It has already invested in ride-haling service Ola, a local challenger to Uber, the largest Internet startup in the world.


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