Flipkart is on an investment spree. And why not? Armed with over $4 billion cash after SoftBank’s $2 billion investment last month, Flipkart is actively scouting for companies that can help it expand its presence across verticals and sectors. Reports suggest that the e-commerce major has held talks with food startup Swiggy, online furniture retailer UrbanLadder, hyperlocal services provider UrbanClap as well as a host of fin-tech terms for potential buyouts. The negotiations are yet to materialize though.
Flipkart is acutely aware of the competitive challenges posed by Amazon, which in less than five years is India’s second-largest e-commerce firm. The Seattle-based e-commerce giant has committed $5 billion in investments in India, of which it has pumped in $2 billion already. Its expanding footprint has not only helped it narrow the gap with market leader Flipkart, but also wiped out several homegrown e-commerce players, most notably Snapdeal. Now, Flipkart is utilizing SoftBank‘s funds as well as investment acumen to strike up strategic partnerships across sectors. ALSO READ: Amazon steps up investments in India, pumps Rs 1,620 crore in marketplace unit: Report
“Flipkart is only seeking large, strategic deals that will directly help its business,” a Mint report stated. Flipkart’s recent filings with the Ministry of Corporate Affairs also confirm this shift towards M&A. According to the September filings, Flipkart increased its reserves for financing acquisitions and significant investments to nearly Rs 8,000 crore (over $1.2 billion) from earlier levels of Rs 3,000 crore. It implies that the company has earmarked significant funds for buyouts and partnerships. Earlier this month, Flipkart reportedly pumped in $500-$700 million in movie ticketing site BookMyShow for a stake. ALSO READ: Flipkart flirts with online ticketing, might pick up minority stake in BookMyShow
Since its inception in 2007, Flipkart has already acquired over 20 small and big firms. Its largest acquisition was that of online fashion retailer Myntra for $330 million, which it followed up with the buyout of Jabong (another fashion e-tailer). Both deals allowed Flipkart to take a significant lead over Amazon in the online fashion segment. Now, it intends to extend that in other verticals too. “Flipkart’s new M&A approach is similar to what the large Chinese internet companies and ventures have done in China over much of the past decade—buy out smaller rivals and pick up strategic stakes in other large internet start-ups,” an official reportedly said.