SoftBank's $2.5 billion ammo to fire up Flipkart 2.0

SoftBank's $2.5 billion ammo to fire up Flipkart 2.0

According to a person aware of the development, SoftBank Vision Fund's investment was a mix of primary and secondary transactions. The U.S. giant had a year ago more than doubled its investment in India to $5 billion in a bid to turn it into its largest market after the U.S.

With the latest round, Flipkart has about $4 billion in cash reserves.

For those left agog at the sheer magnitude of those figures, any surprise might be mitigated by the fact that Amazon, Flipkart's largest rival in India, has pledged to spend $5 billion on its efforts in the country over the next few years.

This investment assumes significance as SoftBank-backed Snapdeal last month called off merger talks with Flipkart.

With this investment, Flipkart has now raised approximately $8 billion via 14 rounds.

SoftBank was supposed to invest $1.52 billion in the proposed merged Snapdeal-Flipkart entity, but after the talks fell through, SoftBank chairman Masayoshi Son said that he respects the decision of the founders and chose to focus the fund's effort in Flipkart.

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Flipkart, which started by selling books on the Internet in 2007, was struggling to raise money until previous year, hobbled by a tough private funding environment and shrinking valuations.

Note here, that the funding has been made via Softbank's Vision Fund, which is worth $100 billion.

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

An acquisition in these verticals will solve the difficulty of building a supply chain for these specialised categories, "To match up, Flipkart will have to invest at least as much as Amazon, and grocery will be important to increase wallet share", said Satish Meena, senior forecast analyst at Forrester. "In Indian e-commerce, Flipkart is doing that every day", said Masayoshi Son, Founder and Chairman and CEO of SoftBank Group Corp., who previously publicly announced his long-term commitment to investing in India.

However, that plan soured after Snapdeal chose to remain independent. With this massive infusion, Softbank has become one of Flipkart's largest shareholders.

"It is impossible for Softbank to now invest in Amazon so they are looking at several smaller companies like Flipkart and Paytm so that atleast a few of them will give them returns like Alibaba did", added Gupta. Current Flipkart CEO Kalyan Krishnamurthy is Tiger Global's representative in the e-commerce major, but his position will come into jeopardy. In April, the firm funneled about $260 million through a subsidiary to the parent company of Ola, India's largest homegrown ride-hailing service.