When we heard Flipkart’s recent $3 billion funding round which includes eBay, we thought it would be typical stock exchange deal. But it rather turn-out to be an interesting side story.
The merger between Flipkart and eBay India is happening, but it is still unclear how (in product sense) and ‘what’ they merge. So besides this, here is the top 5 details you must know about this Merger.
It’s a part of $2 bn funding round, valuing Flipkart to $11 billion –
As per sources, this is a part of the $1 billion Series J round of funding which is led by Chinese internet giant – Tencent ($500Mn), followed by Microsft and eBay. It also suggested, Flipkart will keep the round open until it reaches $2 billion in total.
Due to this round, Flipkart’s valuation marks $10 billion which is less that estimated $15 billion mark but larger than $8 billion as per expected. This data will change ones the second quota get filled.
As per sources, Flipkart had also reached US retailer giant Walmart, to participate in funding round. But they rejected it, due to lack of interest to invest in the medium term.
Flipkart has raised $4.1 billion till now.
Tiger global may get exit or decrease their stock (3x return) –
VCC reports, Tiger Global is looking to sell part of its stock in Flipkart to Microsoft and other new investors in this funding round. The Value of the stock could be valued at $9.3 billion pre-money(3x return).
It will lower Tiger Global’s share to 25% from 33-35% (may vary by deal size). TG has invested $1 billion in Flipkart till now, and this would be the first big part-exit success in India (far more than Caratlane, MakeMyTrip and JustDial).
Neither Flipkart or eBay is profitable, and have different user base –
Flipkart is no exception either in this, however, Flipkart showed 50.3% increase in revenue in the previous financial year (ends March 2016) to Rs 15,403 crores. But it also lost 86% more than the previous year at Rs 5,768.8 crores. Flipkart’s net margin slide to 37.5%, 7.5% less than the previous year. Not to mention exit of top level executives.
Let’s understand eBay now, eBay has lost Rs 262 crore the previous fiscal year, up from Rs 172 crore in the year ended March 2015. But at the time to revenue raise to Rs 392 crore (till March 2016) from Rs 132 crore in March 2015. Considering eBay was established (2004) way earlier than Flipkart or Amazon, this is a minor outcome. Also recently eBay has appointed new India head Vidmay Naini replacing Latif Nathani.
Let us know what you think about this merger? we think it is obviously a great deal for both of them. But still, Flipkart has different user segment (B2C) and eBay has different segment (B2C, but mostly C2C). It will be interesting to see how this works out for both entities. Maybe combining both resources and placing it in one entity, like eBay and Flipkart at one portal.
Speculation – It is not Equity swap –
Reported by YS, a source close to the deal said that eBay is preferring more on equity swap while Flipkart is focusing more on capital. The reason being Flipkart is in fierce need for capital to fight against billion dollars giant Amazon and Alibaba. Although it will only sustain them for a couple of few years. Flipkart has to find a way out by becoming sustainable or profitable in coming years or at least convince their investors of this.
eBay has stake in Snapdeal and it is in bad shape –
Here is an in-depth report on Snapdeal’s business by MC. In short, Snapdeal has not found any new investors since Aug 2016 $21 million funding, plus 6 top-level executives have left the company. Scaling down to 2000 out of 4300+ employees and recent reports of Snapdeal looking for buyers including Paytm and Flipkart and ShopClues led by Softbank.
Things didn’t stop here, Snapdeal previous claim of 300,000 sellers on their platform is actually speculated to be 15-20% of the given number. It had doubled its losses to Rs 2,960 crore during financial ending March 31, 2016, and Snapdeal reported Rs 1,328 crore during the previous financial year. But the revenue rose to Rs 1,457 crore from Rs 933 crore during the same previous financial year.
eBay was an early backer of Snapdeal, but on Aug 18, 2015, it sold part of its stake during $200 million funding by Alibaba, Softbank, and Foxconn. But it still holds a significant amount of stake in Snapdeal. That being said, if Flipkart acquired Snapdeal then eBay will have stakes in both companies which is in-turn big advantage for eBay India.
Getting ready to fight Amazon, Alibaba and Paytm –
This is no exception, Amazon has prepared a fresh $3 billion investment in their Indian arm. This suggests Amazon has no plans to stop or slow down making Flipkart uneasy. Taking into the point that Amazon is way too closer to Flipkart in sales as in 5 days Diwali (2016) sale Amazon sold 15 Mn units and Flipkart sold 15.5 Mn units. Check out this detailed article to understand AMazon’s India profitability plan.
So, do we have to explain Alibaba’s plan? cause it’s very clear – to disrupt the market completely. Alibaba in adjoins to Paytm is all set to enter Indian Market via Paytm’s e-commerce arm. Alibaba has completely different product categories but it will definitely lower the price points of non-brand based categories. Making Flipkart, Snapdeal and Amazon run for the money in this categories.Remember this non-brand category is the direct competition between Alibaba and eBay. Also not to mention Alibaba has a stake in Paytm’s Bank as well, so watch out for integration soon.
All and all, we are here to see some real competition, race and real development (ah hmm Flipkart!). If you are an online buyer, sit back and relaxed because this will only benefit you at large for sure.