EBay Backs Flipkart With $500 Million to Battle Amazon in India

(Bloomberg) -- EBay Inc. is investing $500 million in Flipkart Online Services Pvt., betting that the India e-commerce leader has a fighting chance against Amazon.com Inc., which is has targeted the country as a key growth area.

The financing is part of $1 billion that Flipkart raised last month, which also included funding from Microsoft Corp. and Tencent Holdings Ltd. and may grow by another $1 billion in the coming months. Jeff Bezos, founder and chief executive officer of the Seattle-based web retailer, has pledged to spend $5 billion in India in coming years.

EBay’s Flipkart investment is part of a strategic partnership between the two companies in one of the world’s fastest-growing online shopping markets. As part of the deal, EBay is handing over to Flipkart its India e-commerce business, which has 4 million shoppers and 70,000 merchants, in exchange for equity. The two are also entering an exclusive cross-border agreement in which products from Flipkart merchants will be offered globally on EBay and EBay sellers will gain access to Flipkart’s customers in India.

“The combination of EBay’s position as a leading global e-commerce company and Flipkart’s market stature will allow us to accelerate and maximize the opportunity for both companies in India,” EBay CEO Devin Wenig said in a statement Monday.

Flipkart was valued at about $10 billion in the latest funding round, people with knowledge of the matter have said, a decline from the web retailer’s previous valuation of $15.5 billion in 2015.

Kalyan Krishnamurthy, Flipkart’s CEO, is a former former EBay executive sent in by New York’s Tiger Global Management to replace one of the company’s founders. He was put in charge of operations during the country’s biggest sales season, and fired senior managers and set tough traffic and sales targets. As a result, Flipkart narrowly outsold Amazon during the critical year-end shopping rush.

EBay entered India in 2004, but has been struggling there as Amazon ramps up its presence in the country. The San Jose, California-based company also owns a 5 percent stake in SnapDeal, Flipkart’s largest homegrown competitor.

To contact the reporters on this story: Spencer Soper in Seattle at ssoper@bloomberg.net, Saritha Rai in Bangalore at srai33@bloomberg.net.

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Robert Fenner at rfenner@bloomberg.net, Reed Stevenson, Peter Elstrom