Amazon’s New Nemesis: Softbank Pouring Billions Into Each Flipkart, Snapdeal AND Paytm

Amazon's New Nemesis: Softbank Pouring Billions Into Each Flipkart, Snapdeal AND Paytm

We talked yesterday about Softbank emerging as the biggest e-commerce investor worldwide. SoftBank and its equity fund for tech investments, Vision Fund, have just now invested $2.5 billion into Flipkart. Economic Times:

SoftBank, the world’s largest technology investment firm, has bought a fifth of India’s most valuable startup – Flipkart — for a mammoth $2.5 billion, in a deal that marks the biggest private investment in the country’s consumer technology sector.

Going forward, Tiger Global will play a slightly smaller role at Flipkart:

This deal will provide a partial exit for Tiger Global, the New York-based investment firm, which until now was the largest and most influential investor in Flipkart, three people aware of the deal told ET.

Tiger Global will own about 18% stake in the company now, while South African media giant Naspers along with Chinese internet conglomerate Tencent will together hold another 20% stake.[…]

SoftBank will get at least one board seat on Flipkart, with SoftBank Group International MD Kabir Misra, expected to join the board, according to a source. Misra also occupies one of the two SoftBank board seats on Snapdeal, and is likely to step down from that position.

More important for Flipkart is the fact that the company how has cash reserves big enough for a long battle in the Indian online retail market:

With this investment, Flipkart’s cash reserves cross $4 billion, allowing the Bengaluru-headquartered online retail giant to create a deeper moat, as it prepares to stave off stiff competition from Jeff Bezos’ Amazon.

For comparison, Amazon pledged to invest up to $5 billion into the Indian market. Amazon will certainly have to increase that sum. But here‘s the thing:

Flipkart is now backed by the largest tech & online retail investor in the world, which has the largest ever private equity fund at its disposal.

That alone should scare the bejesus out of Jeff Bezos.

Softbank‘s ambitions go far beyond that. The Japanese giant now has invested something north of $6 billion in India, with its investments in India‘s largest ride-sharing app Ola and its investment of $1.4 billion in Paytm in May of this year. Economic Times:

Softbank has made its biggest investment in an Indian digital enterprise by sealing a funding round of Rs 9,000 crore ($1.4 billion) in One97 Communications which owns mobile payments provider Paytm.

The Japanese internet and telecom conglomerate will now own about a fifth of the Noida-based company estimated to be worth $7 billion, making it the country’s second most valuable startup. […]

China’s Alibaba along with its payments affiliate Alipay owned a 45% stake before this transaction.

Softbank laid out an ambitious 10-year plan in 2014, when the company made its first investment in Snapdeal:

“I have a strong willingness to invest more like $10 billion in the next 10 years,” Son said in an interview on Indian CNBC after his company announced plans to buy in Snapdeal, which connects small businesses with customers in an online marketplace. “I strongly believe that Snapdeal has the potential to be like the Alibaba of India.”

​​Turns out, Flipkart is now far more likely to become just that. Hence, Softbank’s push for a Flipkart-Snapdeal merger and, now that the merger got rejected by Snapdeal‘s founders, the investment in the currently largest online retailer in India.
​​Softbank still owns 33% of Snapdeal.
​​More on this topic:
​​* Softbank, Giving Out Money Like Candy, Is the Biggest E-Commerce Investor Worldwide
​​* Snapdeal Rejects Flipkart Offer, Will Sell Off Some Non-core Assets to Stay Independent
* Why the Battle Between Flipkart and Amazon Has to Be a Battle Between Marketplaces
​* Flipkart Acquires eBay India and Raises $1.4Bn from eBay, Tencent and Microsoft
​* Fight for India: What Alibaba Plans Against Amazon

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