Tiger Global sinks teeth into Flipkart, Snapdeal merger

Softbank is planning to invest up to $1.5 billion in the combined entity for a 15 per cent stake

US-based hedge fund Tiger Global is in talks with Japanese investor SoftBank to sell a part of its stake in Flipkart in exchange for a merger of struggling rival Snapdeal with India’s largest e-commerce company.

Tiger Global, the single largest investor in Flipkart, could divest a third of its shares in exchange for $1 billion from SoftBank. Tiger Global would thus recoup most of the money it had invested in Flipkart and still retain around a 20 per cent stake, sources said.

Since putting its key man Kalyan Krishnamurthy in charge of Flipkart last year, Tiger Global has rationalised costs and brought focus to put up a spirited fight against Amazon in the festive season. Krishnamurthy’s elevation as chief executive in January was a signal to other global investors that the company was ready to attract more investment. 

SoftBank, which is bullish on India, is exploring the possibility of investing up to $1.5 billion in Flipkart-Snapdeal combine for a 15 per cent stake. Flipkart recently raised $1 billion from Tencent and Microsoft at a similar valuation. SoftBank will write off its investment in Snapdeal. 

In the nine months to December 2016, SoftBank wrote off $475 million in the value of its combined shareholding in Snapdeal and Ola, according to regulatory filings. The Japanese company has invested close to $800 million in Snapdeal.

SoftBank ’s potential investment in Flipkart could be routed through its $100-billion Vision Fund, set up in partnership with Saudi Arabia. 

eBay, the US peer-to-peer marketplace, is also trying to exit India by merging its local unit with Flipkart, in addition to the $500 million it has committed to invest.

Flipkart is fast emerging as the sole competitor to Amazon in India with SoftBank and eBay trying to consolidate their units with it. 

The consolidation in Indian e-commerce precedes Alibaba’s full-fledged entry into the market. The Chinese giant recently invested $200 million in Paytm e-commerce, increasing its foothold in India and showing its interest in taking on Amazon and Flipkart.

Analysts see an alliance between SoftBank, Tiger Global, Tencent and eBay as a way for Flipkart to acquire the firepower to take on Amazon and Alibaba.

“In the Indian context, Flipkart is perhaps the only comparison in a relative sense. Flipkart is among the longest standing e-tailers and if you look at the scale of online retail in India, Flipkart has the (dominant) size,” said Devangshu Dutta, chief executive at Third Eyesight. 

With India being the last large global market left for Amazon and Alibaba, their investment here is expected to be unparalleled.