Indian eCommerce’s Darkest Secret: Amazon Was In Talks With Flipkart for a Possible Acquisition?
If business is equivalent to chess, then the news which we are about to announce can be the checkmate of the game.
ET has claimed that Flipkart was in talks with Amazon regarding a possible takeover of the former by the later. But due to valuation of Flipkart, the deal couldn’t get materialized, and things are back to normal.
But in case there is even an iota of truth in this rumored news, then it has the potential to shake up the Indian eCommerce industry.
Interestingly, Flipkart is attempting to raise around $1.5 billion, as the assets and cash which they have right now can only sustain till 18 months, if they continue to spend at the same pace.
The Alleged ‘Meeting’
‘A chorus of voices in the investment community’ somehow contacted ET, and informed them that Amazon and Flipkart representatives are in talks for a possible acquisition. Around 6 such sources have told ET that the last of such meeting happened in the last quarter of 2015 (October-December).
As per the claims of these unknown and unconfirmed sources, Flipkart is in desperate need of funds, and they offered themselves for sale to Amazon which is cash surplus right now thanks to their booming Cloud Computing business.
However, Amazon offered to pay only $11 billion; out of which $8 billion was for their commerce business and $3 billion for their logistics business. As per the sources, Flipkart rejected the offer right away.
Interestingly, Flipkart’s current valuation of $15 billion was reduced to $11 billion by Morgan Stanley recently, and somehow, this gives some credibility to this whole story shared by those unknown sources.
When questioned, Binny Bansal, Flipkart’s new CEO rubbished this report, and said, “All rumours of potential sale and down rounds are false and baseless. Flipkart continues to be the market leader in India and we are in this business for the long haul.”
In fact, in a tweet, Binny Bansal tried to deepen this mystery in a funny way, as he said “Are you sure you got the bit on who was trying to buy who right?It might have been the other way around. No?”
— binnybansal (@binnybansal) March 16, 2016
Amazon has refused to comment on this rumor.
Amazon vs Alibaba?
There is another fascinating angle to this whole story: Alibaba.
This is a confirmed fact that Alibaba is in talks with Flipkart to buy a stake and infuse $1 billion into India’s largest ecommerce portal. And this development ain’t good for Amazon, which is desperately trying to become the market leader of digital business inside India.
Alibaba, which already has Snapdeal & Paytm with them, is trying for a coup by getting a stake in Flipkart, and Amazon can do anything to stop it. If Alibaba is able to buy a stake in Flipkart by reportedly paying $1 billion, then they can easily combine the forces of Paytm, Snapdeal and Flipkart to create a massive front which can defeat Amazon (atleast in India).
In fact, if Flipkart is India’s most valued startup, then Snapdeal is India’s 2nd most valued startup and Paytm is the only Indian company with 10 crore customers. If these three players play with the same team, then it would be a complete market domination.
As per available reports, Alibaba is baiting time, and creating a scenario wherein Flipkart’s valuation is further reduced so that they can get more stake and more equity. Alibaba, led by SoftBank, has around $17 billion in their kitty, and the best part is that, they have enough time and patience.
As per Author Kashyap Deorah, the current eCommerce market in India is like a poker game, and three biggest players of this game are: Flipkart (Tiger Global); Alibaba (SoftBank) and Amazon. Each one of them are aware that major consolidation would eventually happen, but no one is able to make the first move.
The cards have been distributed, and the stake is clear. It’s all about who blinks first.
As a consumer, do you think that Flipkart, which is India’s most valued startup, should sell out now and hand over the power to an American or Chinese investor? Or should they keep on the fight, and defeat them by becoming the market leader? Do share your comments right here!