Flipkart acquires eBay India

India’s largest online retailer Flipkart has closed a mammoth funding round of $1.4 Billion from Tencent Holding Ltd, eBay Inc., and Microsoft Corp., in the biggest ever start-up funding round that both boosts Flipkart ability to compete with arch-rival Amazon India and takes the company a step closer to presenting itself as the only option to the US firm’s Indian arm.

Flipkart Ltd will also buy eBay’s India business as part of the $1.4 Billion deal. The funding round values Flipkart at $11.6 Billion, which is lower than its peak valuation of $15 billion but still higher than the valuation it was assigned by some of its own investors last year. Flipkart may get additional capital soon as it is in talks to buy smaller rival Snapdeal (Jasper Infotech Pvt. Ltd). 

The deal valued eBay’s India unit at $200-$250 million. eBay India will continue to operate its platform as a unit of Flipkart; it becomes the latest acquisition for Flipkart, which has bought the fashion retailers Myntra and Jabong as well as mobile payments app PhonePe in the past three years. The Bengaluru-based online retailer fetched a pre-money valuation of $10.2 billion in the latest round. Pre-money refers to the value of the company excluding the round’s capital infusion.

 Before this round, Flipkart had last raised funds in June 2015 when existing investors led by Tiger Global Management pumped $700 million into the company, valuing it at $15 billion. Since starting out in 2007, Flipkart has raised nearly $5 billion in capital, accounting for more than 45% of funds raised by all 10 Indian unicorns, which include Snapdeal, Paytm, Ola and Quikr. Amazon has committed $5 billion toward its Indian operations, of which it has already spent more than $2 billion.

Flipkart acquires payments start-up PhonePe

E-commerce marketplace Flipkart Ltd has acquired Payments start-up PhonePe Internet Pvt. Ltd. which was launched last December by former Flipkart executives. Flipkart was in talks to acquire a majority stake in the company for an amount between $10 Million and $20 Million. The PhonePe team will join Flipkart but will function as an independent business unit.

Payments have been one of the biggest hurdles for mass adoption of online shopping in India. UPI has the potential of transforming the entire payments ecosystem in the country. The acquisition of PhonePe is in line with Flipkart focus on driving innovation on the payments front. PhonePe is Flipkart third acquisition in payments, after it bought payments start-up NGPay in 2014 and FX Mart Pvt. Ltd which owns a prepaid wallet license.

PhonePe hasn’t launched a product but is working on a payments solution around the Unified Payments Interface an initiative of the National Payments Corp. of India, which will allow fund transfer between banks and will make inter-operability between banks and instant payments possible by using a single identifier like the Aadhaar number or a virtual address.

The UPI is part of a set of government programmes and technologies, together called India Stack that companies use to slash costs in offline authentication and provide services legally approved by the government to anyone with a mobile phone. The UPI is set to be formally launched in April. PhonePe mission is to significantly improve the online and offline digital payments experience for Millions of Indian customers.