SoftBank Fund Is Said to Invest $2.5 Billion in Flipkart

(Bloomberg) -- SoftBank Vision Fund will invest about $2.5 billion in Flipkart Group, swelling the Indian e-commerce players’ cash hoard as it vies with Amazon.com Inc., people familiar familiar with the matter said.

The investment includes approximately $1.5 billion directly into Flipkart and $1 billion for part of Tiger Global Management’s stake, the people said, asking not to be identified discussing the details. The deal will make the fund created by SoftBank Group Corp. Chairman Masayoshi Son the biggest shareholder of Flipkart, the people said. Flipkart announced the fund’s investment earlier without revealing an amount.

The investment boosts Flipkart’s cash holdings to more than $4 billion and comes less than two weeks after Snapdeal, backed by SoftBank itself, walked away from a proposed merger with Flipkart. Amazon founder Jeff Bezos has vowed to spend $5 billion in India to gain customers in a market with 500 million internet users where e-commerce is expected to grow at 30 percent annually over five years.

“This kind of funding can help Flipkart match Amazon’s spending dollar-to-dollar for the next three to four years," said Satish Meena, the Delhi-based senior forecast analyst at Forrester Inc. “After the Snapdeal merger backfired, SoftBank really had only one e-commerce investment option in India: Flipkart.”

SoftBank’s investment is part of a previously announced financing that drew capital from Tencent Holdings Ltd., EBay Inc. and Microsoft Corp. and valued Flipkart at $11.6 billion.

The announcement comes amid a busy stretch of deal-making for Son. This month, the Vision Fund also led a $1.1 billion round of fundraising in the Anglo-Swiss pharmaceutical group Roivant Sciences Ltd., while SoftBank invested $250 million in the U.S. online lender Kabbage Inc. Son told investors on a call this week he is looking to invest in Uber Technologies Inc. or ride-hailing rival Lyft Inc. And he’s held negotiations to combine U.S. wireless operator Sprint Corp. with a partner, possibly T-Mobile US Inc. or Charter Communications Inc., people familiar with the matter have said.

The Flipkart deal effectively means India will become a battleground with Amazon on one side and everyone else on the other to make it harder for Bezos to reach the top position in the country, Meena said. The Indian company will need to figure out how to hold onto consumers because Amazon’s platform has a stronger track record for retaining shoppers, according to Meena.

“This is a monumental deal for Flipkart and India. Very few economies globally attract such overwhelming interest from top-tier investors,” Binny Bansal and Sachin Bansal, co-founders of Flipkart, said in a statement.

The investment is the biggest venture deal in India, the people familiar said.

SoftBank, which holds almost a third of Snapdeal shares, and Tiger Global had been pushing the proposed merger with Flipkart to create a stronger competitor to Amazon. That deal fell apart after Snapdeal’s founders raised objections.

To contact the reporter on this story: Saritha Rai in Bangalore at srai33@bloomberg.net.

To contact the editors responsible for this story: Robert Fenner at rfenner@bloomberg.net, Edwin Chan