Softbank to invest over $2.5 billion in Flipkart

Japanese telecom and investment giant Softbank just made sure Flipkart has plenty of cash to fight off Amazon's aggressive push into India. The U.S. giant had previous year more than doubled its investment in India to $5 billion in a bid to turn it into its largest market after the U.S.

Flipkart and SoftBank did not comment on the quantum of investment, but said the company now has a cash reserve of more than $4 billion. Flipkart had already raised $1.4 billion (£1.1 billion) as part of the same funding round from Tencent, Microsoft, and eBay.

SoftBank Vision Fund's infusion of $2.5 billion into Flipkart gives it a ready war-chest to unravel its next level - Flipkart 2.0 - which will help it take on close rival Amazon India which has spent over $2 billion to grow its India business, with promise of more.

Softbank may have missed out on getting a piece of Flipkart when the much anticipated Flipkart Snapdeal merger fell through last month. "SoftBank's proven track record of partnering with transformative technology leaders has earned it the reputation of being a visionary investor", Flipkart co-founders Binny Bansal and Sachin Bansal said in a joint statement. That deal valued Flipkart at $11.6 billion. 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.

Amazon has also committed around $5 billion in the India since 2014 and is likely to pump in more.

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"India is a land of vast opportunity", Mr. Son said in a statement.

Earlier reports had suggested that Softbank was in talks with Flipkart to invest at least ₹10,000 crores. "As the pioneers in Indian e-commerce, Flipkart is doing that every day", SoftBank chairman and CEO Masayoshi Son said.

Soon after calling off a potential deal, Chief Executive Bahl said the company, which has been steadily ceding market share to Flipkart and Amazon, will run a stripped-down version of its online marketplace in its second-coming and sell some of its non-core assets. That's not all, the investment by Softbank's Vision Fund is the biggest ever private investment in an Indian technology company.

This is an alpha moment not only for the e-commerce market, but also for the Indian tech ecosystem. In April, the firm funneled about $260 million through a subsidiary to the parent company of Ola, India's largest homegrown ride-hailing service.

(Copyright © 2015. All Rights Reserved.)
 
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