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SoftBank Invests $ 2.5 billion in Flipkart to become one of its Largest Shareholders

Japanese investment conglomerate SoftBank has made undisclosed amount of investment in Flipkart. Sources claim that the investment is close $ 2.5 billion, which would make SoftBank one of the largest shareholders in the Bengaluru based E commerce company. This is also the largest ever investment in an Indian tech startup company till date.

Softbank has made the investment through its SoftBank Vision Fund, a dedicated $100 billion investment fund that was set up earlier this year to invest in world’s emerging tech companies. The investment fund is widely hailed as the world’s largest technology investment fund.

Flipkart.

Flipkart gets $ 2.5 billion funding from Softbank.

Flipkart obviously has welcomed SoftBank’s investment with open arms. The e commerce Juggernaut will now look to capitalize on the latest capital infusion as its battle with Amazon heats up. The Bengaluru based e tailer said that the latest SoftBank funding is part of the recently announced $ 1.4 billion funding, in which global tech giants like Tencent, eBay and Microsoft had participated.

Co-founders Binny Bansal and Sachin Bansal have called Japanese conglomerate’s investment as a monumental deal for Flipkart as well as India. Both said that the massive investment is a validation of India’s massive potential to become a leader in the global e-commerce industry.

Investment comes immediately after fall of Flipkart – Snapdeal deal

The investment in Flipkart would have been much more prudent for SoftBank, had the Flipkart –Snapdeal not collapsed few weeks back. The Japanese giant was desperately trying to engineer a merger between the two e-commerce companies. A merger would have helped SoftBank to salvage its failed investment in Sneapdeal, which was increasingly finding it difficult to compete with Flipkart and Amazon.

However, SoftBank’s plan was sabotaged by Snapdeal’s co-founders – Kunal Bahl & Rohit Bhansal – as they were staunchly against this merger. But the deal’s collapse evidently did not stop SoftBank from investing in Flipkart. The decision seems to be a desperate move by the Japanese Conglomerate in a bid to get a bigger pie in the Indian e-commerce market.

On the outset, the Indian e-commerce market looks a pretty lucrative market, which is partly because of the sporadic growth in India’s internet users. However, the sporadic growth in internet usage has not ensured smooth sailing for any e-tailers till now. Flipkart is a great example in itself, which despite being heavily funded is far from being a standalone profitable company.

The company’s road towards profitability became tough partly because of Amazon’ entry in 2013 and its subsequent rise. The thing with Amazon is that unlike Flipkart it is not dependent on external funding. The Seattle based e-commerce giant has a deep cash reserves, which gives it a needed financial muscle to take on any player.

But only time will tell whether Amazon’s financial muscle is good enough to gallop Flipkart, or whether Flipkart will emerge as the unexpected hero of the Indian e- commerce market. For the time being though Softbank’s huge capital infusion will give much needed breather to the Bengaluru based e-tailer.

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