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Flipkart gets US$3.6 billion in funding from Walmart, SoftBank, and sovereign funds

E-commerce

Flipkart’s latest round of investment comes at a time when the government’s proposed changes to existing laws seek to tighten the screws around FDI. 

The Flipkart Group on Monday announced that it raised US$3.6 billion in funding. The fundraiser included participation from sovereign funds, private equity, and crossovers in addition to Walmart.

The round was led by GIC (a Singaporean sovereign wealth fund), Canada Pension Plan Investment Board (CPP Investments), SoftBank Vision Fund 2, and Walmart, along with investments from sovereign funds DisruptAD, Qatar Investment Authority, Khazanah Nasional Berhad, Tencent, Willoughby Capital, Antara Capital, Franklin Templeton, and Tiger Global. The investment values the Group at US $37.6 billion. 

“With this development, Flipkart will continue to make deeper investments across people, technology, supply chain and infrastructure,” the company said in its press release announcing the round. “Through its expanding grocery and last-mile delivery programs, the Group will also work with kiranas to help them digitize and grow,” the company added.

 Flipkart’s subsidiaries include logistics and supply chain arm Ekart, and Shopsy, a newly launched service on a reseller model leveraging Flipkart’s catalogue. Flipkart is also a majority shareholder in payments app PhonePe. 

E-commerce regulation looms

The investment round, among the largest in the e-commerce space so far, comes even as online retailers struggle with looming e-commerce regulations that strike at the heart of their business model. The draft amendments to the Consumer Protection (E-Commerce) Rules, 2020, tighten the screws with regard to Foreign Direct Investment that only e-commerce companies that maintain their own inventory can receive. Flipkart and Amazon have consistently engineered corporate structures and ownership for sellers like RetailNet and Cloudtail that allow them to operate as “marketplace” entities even if they have a lot of control over those third parties’ inventory and marketing.

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“Related parties and associated enterprises” cannot be sellers on e-commerce platforms like Flipkart and Amazon, and flash sales that are tightly controlled by platforms are prohibited. Flash sales are frequently organised by Flipkart, drawing the ire of brick-and-mortar unions like the Confederation of All India Traders, who call the practice deceptive.

Additionally, e-commerce sites will have to take steps to hire compliance, nodal and grievance officers, avoid selling counterfeit goods, and clearly mark the origin of imported products. Furthermore, platforms can’t use their name to promote products, or advertise sales to sellers. Sponsored listings must be clearly demarcated, and bills must have seller name and platform name in the same size.

Antitrust investigation on

Meanwhile, the Competition Commission of India (CCI) is seeking to probe Flipkart and Amazon for allegedly subverting FDI norms. The investigation was initiated upon a complaint received from the Delhi Vyapar Mahasangh (DVM), an MSME (Micro, Small and Medium Enterprises) smartphone trader union.

The probe against Amazon and Flipkart was ordered to investigate four alleged violations::

  1. Exclusive launch of mobile phones
  2. Promoting preferred sellers on their websites
  3. Deep discounting practices
  4. Prioritising some seller listings over others

Timeline of events

January 13, 2020: The CCI launched an investigation in January last year against Amazon and Flipkart. However, the Karnataka HC stayed this investigation after Amazon and Flipkart challenged it saying the CCI had no evidence that the two companies were harming competition.

October 26, 2020: The Supreme Court refused to hear a plea filed by the CCI, which sought to remove the Karnataka HC-directed stay on its probe against Amazon and Flipkart. Instead, the apex court directed the HC to decide on the matter within six weeks.

June 11, 2021: The Karnataka HC dismissed pleas by Amazon and Flipkart to quash the CCI investigation into the business practices of the firms, according to another report by Reuters.

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June 15, 2021: Reuters reported that CCI will expedite the restarted investigation. People familiar with the matter told the news agency that CCI plans to demand information from both the e-commerce giants “as quickly as possible.”

June 17, 2021: Both Amazon and Flipkart challenged the Karnataka HC decision, Reuters reported. In the latest appeal filed by Flipkart on June 16, the e-commerce company argues that the decision by the court to allow the probe to resume “was erroneous and must be put on hold”, the report stated. “Irreparable injury will be caused to the appellant if the investigation was to continue pending the present appeal,” said the Flipkart filing as quoted by Reuters. Amazon has filed a similar challenge and both the cases will likely be heard by a two-judge panel this week, the report added.

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I cover the digital content ecosystem and telecom for MediaNama.

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