Flipkart, the Walmart Inc-owned e-commerce firm, is in talks to raise at least $3 billion from investors, including Japan’s SoftBank Group and various sovereign wealth funds.
The possible return of SoftBank to Flipkart comes at a time the e-commerce segment is witnessing strong growth as the pandemic has forced individuals to stay indoors and make online purchases. This trend is only expected to continue in the future.
According to a Bernstein report, the e-commerce market is expected to grow to $133 billion in 2025 from $24 billion in 2018, a compounded annual growth rate of around 30 per cent based on various estimates.
It added that the increase in internet penetration, higher per capita income, broader selection criteria and convenient delivery are driving adoption and growth.
While there are only three big players in the market — Flipkart, Reliance Jio and Amazon, the one with the “most compelling integrated value proposition, offline plus online and prime” will be the leader, the brokerage said.
SoftBank had sold its around 20 per cent share after Walmart agreed to buy a 77 per cent stake in Flipkart for $16 billion in 2018. While its return could be prompted by the robust potential of e-commerce in India, Flipkart will need the much needed capital to take on Amazon and JioMart.
A Bloomberg report said that Flipkart is in talks not only with SoftBank, but also several sovereign wealth funds and that it is targeting a valuation of $40 billion. In 2020, Walmart had led a $1.2-billion funding round that valued the e-tailer at $24.9 billion post the infusion.
Singapore’s GIC, Canada Pension Plan Investment Board and the Abu Dhabi Investment Authority are some of the other funds with which Flipkart is in discussions, the report added. On the other hand, SoftBank could invest $300-600 million through its Vision Fund II (SVF2).
For Flipkart, the fresh capital dose could also come ahead of a planned initial public offering next year.
India remains an attractive investment destination for SoftBank. It has backed companies such as Paytm, Ola, policybazaar and Delhivery. Last month, SoftBank invested $250-million in banking technology start-up Zeta. Earlier this year, it led a $300-million funding round in Meesho which helped the social commerce platform attain the unicorn status.
Some of the other SVF2 investments in India include Lenskart, Unacademy and MindTickle. Recent reports say that SoftBank may invest up to $4 billion in India during this calendar year across various sectors.
Recently, Flipkart had said that it had hired 23,000 people in India across its supply chain, including delivery executives, between March and May. The company had also announced the expansion of its fulfilment centre capacity for grocery by more than 8 lakh sq ft over the next three months across Delhi, Calcutta and other cities. The additional fulfilment centre capacity will help the e-tailer cater to over 73,000 grocery orders per day.
