Telecom and Internet conglomerate, SoftBank Group Corp. stated that it was interested in acquiring shares in Indian e-commerce marketplace, Flipkart Ltd. If successful, the acquisition could hike the latter’s value to $9-10 billion.
The move will not come as a shock to shareholders since SoftBank has expressed interest in the company in the past.
In August of this year, the company invested in a primary fund infusion into Flipkart. At the time, SoftBank also agreed to buy shares worth $1.2-1.4 billion from Flipkart shareholders.
As of now, SoftBank has agreed to buy the Flipkart shares for $85-89 per share. The price range quoted has Flipkart valued lower than the pre-money valuation. This was conducted when the company managed to secure two funding rounds at $1.4 billion each.
The investments at the time were made by eBay Inc., Microsoft Corp., Tencent Holdings Ltd., and SoftBank itself.
The Flipkart-SoftBank deal is certain to be a game changer for the e-commerce industry in India. It will automatically boost Flipkart’s ability to compete with its biggest rival- Amazon India.
The investment means that Flipkart now has a major stakeholder, which will pump its coffers whenever the American retailing giant is closing in on its territory.
The deal is also likely to affect India’s start-up investors. Flipkart’s largest investor is currently Tiger Global Management. Tiger Global Management’s former employee Kalyan Krishnamurthy is Flipkart’s current CEO.
Sources state that Tiger Global Management is likely to sell close to $700 million worth in shares. Reports indicate that Flipkart’s other investors such as Accel, IDG Ventures, Kalaari Capital are likely to participate in the sale.
Sources believe that the share sale and fund infusion with SoftBank are likely to be completed by the end of the year.