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eBay, Tencent and Microsoft Invests $1B in Flipkart

The ecommerce industry in India is expected to grow more than 50 percent for the next several years, fueled by a new generation of people connecting to the Internet for the first time on affordable mobile phones.

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Flipkart which also owns fashion portals Myntra and Jabong, has been looking out to raise investment. Earlier this month, it was reported by Economics Times that Flipkart is preparing to raise Rs. 3,400-5,400 crore ($500-800 million) at a valuation of $10-12 billion.

In a report by Bloomberg, it was that mentioned Flipkart raised $ 1 Bn investment, wherein Microsoft, Tencent and eBay participated in this round.

History of Investment Rounds

Flipkart’s last raised $700 million in October 2014 from UK-based investment management firm Baillie Gifford, US-based VC fund Greenoaks Capital, Steadview Capital, T Rowe Price Associates, and Qatar Investment Authority. The round also saw participation from existing investors DST Global, GIC, Iconiq Capital, and Tiger Global.

In 2015 Flipkart raised from Qatar Investment Authority, Tiger Global and existing investors at a valuation of $ 15 Bn.

In 2016 Flipkart struggled with exits of many top-level executives making reconsider several transactions, which led to a downside of its valuation. Most recently, a mutual fund managed by Fidelity Investments lowered the value of its investment in Flipkart by 36% to $5.56 billion. In September 2016, Morgan Stanley valued Flipkart at $5.57 billion. However, according to sources, Tiger Global is looking out for an exit after sinking over $1 billion into Flipkart.

The Investors

One the of the investors, Tencent has invested in Naspers-controlled MIH Group. In this investment it holds stakes in ibibo, which has now merged with Makemytrip. Tencent is popularly known for introducing WeChat which is the most widely used instant messaging app in China.

It was also reported that, Tencent led a $175 million funding round in Hike, along with Foxconn in August 2016. In 2012, it introduced WeChat through ibibo gaming.

Amazon vs. Flipkart

Kalyan Krishnamurthy, an ex-Tiger Global MD and ex-executive of ebay, took over the reins of Flipkart. The Bangalore-based e-tailer “BigBillionDays” sale last year made it surpass Amazon by a big margin. Flipkart reportedly earned $300 million from last year’s Big Billion sales.

Flipkart started stabilising its performance under Krishnamurthy as its sales pipped Amazon's during the Diwali season last year, generating interest from a new set of investors after talks failed with Walmart.

"Under Krishnamurthy, Flipkart has gone back to shoring up its smartphone sales once again which is helping it gain momentum in monthly gross sales. The likes of Motorola have made a come back to Flipkart due to the sheer volumes it gets from the platform compared to what these brands got on Amazon," said a person directly aware of the developments.

Infact, eCommerce is influencing its marketing schemes in various mannerisms. Snapdeal recently announced Rs 200 crore in marketing, which was immediately followed by rebranding with a new logo and ads.

Amazon is the biggest spender on advertising among e-commerce firms.In 2015, Amazon reportedly lost Rs 1,724 crore in India due to high expenses in advertising.

In was reported by Economic Times that Amazon India received 7K Cr funding in 2016 from its US parent.

Flipkart was found to grow their root in both tier-II cities, which at present makes nearly two thirds of total sales. Its customer base had crossed 100 million, while India’s overall internet user base stands at over 400 million.

The ecommerce industry in India is expected to grow more than 50 percent for the next several years, fueled by a new generation of people connecting to the Internet for the first time on affordable mobile phones.

In the upcoming fiscal year, Flipkart predicts its e-commerce market to increase by 40-50% which will lead its sales to jump by 50-60%, indicating it will gain market share from Amazon. Flipkart will have to bring in less-cash intensive methods to acquire new customers and retain the existing customers.

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ebay tencent microsoft flipkart

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