SoftBank may invest $500 million in Flipkart as part of a $2-billion investment plan

While Flipkart and Snapdeal continue to negotiate terms, the orchestrator of the deal Snapdeal may soon invest $500 million in Flipkart, according to a report in FactorDaily.

“This will be part of the Snapdeal-Flipkart deal, where some of the existing Snapdeal investors are looking for an exit,” said one of the two sources FactorDaily spoke to.

Sources say that Softbank has planned a $2 billion investment in Flipkart. But only a part of it will be primary funding. Effectively, Flipkart will only get $500 million out of the $2 billion as primary funds.

The remaining $1.5 billion may be to pay back Flipkart’s largest investor Tiger Global and Snapdeal’s investors. Former managing director of Tiger Global, Kalyan Krishnamurthy is currently the CEO of Flipkart.

This round of funding will also see Snapdeal’s larger investors Kalaari Capital and Nexus Venture Partners getting an exit, along with founders Kunal Bahl, Rohit Bansal and all the other smaller investors.

Tiger Global too, may get a partial exit.

Flipkart is currently negotiating with Snapdeal after the board of the latter rejected an offer of $700-750 million. Reports suggest that Flipkart is now working on making a fresh offer of somewhere around $900 million. When talks began initially, Flipkart had agreed to buy Snapdeal for nearly $1 billion.

Once the acquisition goes through, SoftBank will get two seats in the merged entity.

There has been a wave of consolidation in India’s ecommerce space. Apart from the largest Flipkart-Snapdeal acquisition, Flipkart bought fashion portals Myntra and Jabong in the past couple of years. Most recently, it has also acquired the Indian operations of eBay.

Paytm and a few others are in talks to buy Snapdeal’s payments arm FreeCharge.

SoftBank also recently invested $1.4 billion in Alibaba-backed Paytm. One97, Paytm’s parent is also in talks with online grocery player BigBasket.