Masayoshi Son-led SoftBank Group may invest $700 million in Flipkart

Techy conglomerate investing in Flipkart at a time when Reliance Industries and Tata are betting big on e-commerce as well.

Flipkart | Masayoshi Son | SoftBank

BS Reporter  | 

Masayoshi Son-led SoftBank Group Corp is in talks with Flipkart to invest $700 million in the e-commerce giant, according to the reports by The Economic Times and Mint. Japan’s SoftBank is looking to invest in Flipkart, three years after it sold its entire stake in the company to Walmart Inc, the world’s largest retailer.

It has been reported that the financing is part of a larger $2 billion round. Sovereign wealth funds such as Abu Dhabi’s ADQ and Canada Pension Plan Investment Board (CPPIB) are expected to participate in this round. Existing investors such as GIC and Qatar Investment Authority may also invest. The transaction is likely to value the Bengaluru-based firm at $25-30 billion.

Last July, Walmart led a $1.2-billion round in Flipkart, valuing the e-commerce firm at $24.9 billion. The Bentonville-based company (in Arkansas) is locked in a battle with US rival Jeff Bezos-led Amazon and Mukesh Ambani-owned Reliance’s JioMart for dominance in India’s online retail market through Flipkart, which it bought for $16 billion in 2018.

Walmart-owned Flipkart and PhonePe, the digital payments firm, are planning to go public in the US by 2022. Sources said Flipkart is eyeing a valuation of about $40 billion for the IPO. However, it has been reported that the new SoftBank funding could delay Flipkart’s IPO plans and the firm may stay private for a longer time.

Before it’s exit in 2018, SoftBank had earlier invested $2.5 billion in Flipkart. The technology conglomerate is investing in Flipkart at a time when players such as Reliance Industries and Tata are also betting big on e-commerce and making acquisitions. Reliance’s Jio Platforms has raised billions of dollars from investors including Facebook and private equity firms such as Silver Lake and KKR.

Tata Sons has announced the acquisition of e-grocery firm BigBasket. Cementing its foray into the online grocery market, Tata Sons, through its subsidiary Tata Digital, has acquired a majority stake in BigBasket. While the company declined to comment on valuations, reports suggest Bigbasket’s valuation at $2 billion.

Flipkart’s rival Amazon has so far committed over $6.5 billion to the India market. It has been scaling up its investments in the country at a time when the Seattle-headquartered firm had signed off from China.

If the SoftBank- Flipkart deal is successful, the funding may help the e-commerce firm compete with players such as Amazon, Reliance’s JioMart, and Tata Group.

Masayoshi Son

Masayoshi Son

Only 7 per cent of the $1.2-trillion retail market is online, and all these players are aggressively eyeing the remaining 93 per cent, according to analysts. The market opportunities for online commerce in the country are also expected to touch $200 billion by 2028 from $30 billion in 2018. Also, India’s e-commerce market is expected to grow dramatically as a result of the coronavirus pandemic.

The SoftBank funding may also help Flipkart to form strategic partnerships and do acquisitions. Flipkart is eyeing strategic stakes in multiple small, regional as well large retailers in India as it looks to tap the offline retail opportunity in the country. It is in a race with rivals Amazon and Reliance’s JioMart, who are also following a similar strategy and are in talks with multiple Indian offline retailers to buy strategic stakes.

For instance, last year Flipkart Group and Aditya Birla Fashion and Retail Limited (ABFRL) formed a new strategic partnership aimed at enhancing the consumer fashion experience. Flipkart made an investment of Rs 1,500 crore in ABFRL. Last year, Flipkart Group also bought a significant minority stake in retailer Arvind Fashions’ (AFL) subsidiary Arvind Youth Brands.

Flipkart is also enhancing consumer experiences through strategic stakes or acquisitions of tech startups. Last November, Flipkart acquired Scapic, an Augmented Reality company (AR), to enhance its e-commerce shopping experience capabilities. Last year, it also strengthened its gaming strategy through the acquisition of intellectual property (IP) from Mech Mocha, a mobile gaming start-up. Flipkart and its parent Walmart also made a fresh round of investment in Ninjacart that connects farmers with kiranas and businesses using technology. In April this year, Flipkart announced its proposed acquisition of Cleartrip, a leading online travel technology company.

It has been reported that SoftBank could put more than $4 billion to work in India in 2021 in the technology sector. These include edtech, healthtech, e-commerce, B2B marketplaces and software-as-a-service (SaaS). The investments will come from the SoftBank’s Vision Fund 2, which has an investment outlay of up to $30 billion for the current calendar year.

SoftBank Vision Fund 2 has made big bets in India this year. It is in advanced stages of talks to invest up to $500 million in food delivery giant Swiggy. Last month, banking technology start-up Zeta became the latest entrant to the unicorn club after raising $250 million in its Series C round from SoftBank Vision Fund 2. Also, it has been reported that OFB Tech, which runs the OfBusiness business-to-business marketplace, is in advanced talks to raise $150 million from SoftBank.

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