As the battle between ecommerce players Flipkart and Amazon in India rages on, Flipkart is now looking at more investments and buyouts to diversify business and gain an edge over Amazon India.
According to a report in Mint, Flipkart has met with startups such as Swiggy, Urban Clap, UrbanLadder and a few insurance and wealth management startups for possible investments. There were reports last week of Flipkart looking to buy a large minority stake in Bookmyshow.
In the past few years, Flipkart has invested in and bought over 20 startups. Some of the biggest deals were its acquisition of fashion retailer Myntra in 2014 for $330 million, Myntra’s acquisition of Jabong in 2016, acquisition of eBay’s India operations in August 2017. It has also invested in in trucking marketplace Blackbuck and advertising tech start-up AdIquity.
Earlier this year, Flipkart also tried to buy smaller rival Snapdeal for nearly $1 billion in a stock deal orchestrated by SoftBank, but the deal collapsed in August because of differences over various aspects such as valuation and structure.
Mint reports that Flipkart is now only looking at large strategic deals to directly help its business. This M&A approach mark a shift from its strategy of 2014-15, when it planned to invest regularly and build a venture capital-like portfolio.
What also confirms this strategy is the fact that filings with corporate affairs ministry in September show that Flipkart increased its reserves for financing acquisitions and significant investments to roughly Rs 8,000 crore from Rs 3,000 crore.
Sources in the company told Mint that this new approach is similar to what large Chinese internet companies and ventures have done in China over much of the past decade. They buy out smaller rivals and pick up strategic stakes in other large internet startups.
“Flipkart is trying to do two things—firstly, they are ensuring that they reach a size and scale from which they can’t be toppled by even deep-pocketed rivals such as Amazon. Secondly, they are essentially not missing the bus and protecting themselves from disruption,” Mint quotes the source as saying.
The sudden surge in M&A activity from Flipkart is a direct result of the fresh capital of $3 billion it raised in a round from SoftBank, Tencent Holdings, eBay and Microsoft.
As rival Amazon has been pumping in funds into its India unit, Flipkart has been battling the global ecommerce major to remain at the top of India’s ecommerce market, which, Mint reports, has seen a sharp slowdown in growth since the start of 2016.
Analysts are of the view that Flipkart should look at deals that would boost sales.
Flipkart has also been expanding into newer segments to maintain its competitive edge. There were reports last week that Flipkart may bring back its loyalty program to take on Prime. It is also reportedly looking at bringing back the grocery business, given that Amazon is betting big on that segment.
It is also has plans of offering financial products such as insurance and wealth management products. To launch this business, it will explore picking up a stake in fintech start-ups.