As the involvement of multiple parties gets deeper in the hectic buying and selling activity in India's hot e-commerce space, we untangle the web of Indian e-commerce sector for you. Here’s a look at what is being sold, who is buying and who is selling.
Indian e-commerce sector is abuzz with activity. Last week, investor Nexus Ventures reportedly agreed to take a $80 million payout in return for its equity holding in Snapdeal, paving the way for the online marketplace’s proposed sale to the market leader Flipkart for about $1 billion.
Japanese telecom and internet giant Softbank, the single largest stakeholder in Snapdeal, had been pushing hard for its sale to Flipkart, in a desperate effort to switch its holding in the struggling e-commerce major with that in other robust firms.
Meanwhile, the digital payments major Paytm has in-principle agreed to take over Snapdeal-owned payments wallet Freecharge. On the other hand, Flipkart is on a buying spree, most recently taking into its fold EBay’s India unit.
As the involvement of multiple parties gets deeper in the hectic buying and selling activity, we untangle the web of Indian e-commerce sector for you. Here’s a look at what is being sold, who is buying and who is selling:
In the driving seat
At the helm of all the M&A activity in India’s e-commerce at present is Softbank, which is apparently consolidating its India holdings into the respective market leaders. The Japanese investor is the single largest stakeholder in Snapdeal with 33% equity stake in it, bought with cumulative $900 million investments in the company over the last two-and-a-half years.
It is now seeking to exit the holding, but has not given up on the Indian market as such. Instead, Softbank is looking to get a hold into the more robust and perhaps better growth candidate Flipkart.
Switching to the fast lane
But that’s not all. Softbank has chosen the route of selling Snapdeal itself to Flipkart, leaving it with one less competitor in the crowded market once the deal is through. Softbank has also persuaded Snapdeal to sell its mobile payments unit Freecharge to India’s leading digital wallet operator Paytm.
Now, interestingly, Paytm’s holding company One97 Communications is reported be about 40% owned by China’s e-commerce giant Alibaba, in which Softbank in turn holds 28% equity stake. Thus, in effect, Softbank will continue to have the market leader Paytm as part of its portfolio, with one competitor out of the market.
Engines of growth
Flipkart has well-established its market leadership, and appears to be in no mood to easily give it up. The company started by two ex-IITians as an online platform to buying and selling books has now grown into a Rs 15,000 crore behemoth, acquiring clothing and accessories retailers Myntra.com and Jabong.com along the way. Earlier last month, Flipkart pulled a coup by buying EBay India, and got Tencent, Microsoft and EBay Inc to invest $1.4 billion into it — its single-largest to date.
Flipkart’s existing investors include Tiger Global Management, Naspers Group, Accel Partners and DST Global. The move may be Flipkart’s attempt to become large enough to fend off any possible competition from the global giant Amazon, which is which is fast catching up to beat it in its home market.
Meanwhile, China’s Alibaba — Softbank’s important portfolio investment — has also got a seat at the table by picking up a significant equity stake in Paytm Mall — the newly-formed marketplace business of Paytmwith a $177 million investment. The fresh investment by Alibaba in Paytm Mall will reportedly take its stakeholding in the e-retailer to 36.31%, while SAIF Partners will hold 4.66% post the funding. Softbank is also reported to be in discussions to invest over $1 billion in Paytm itself, to help fuel the growth even further.