flipkart sachin binny bansal

Sachin and Binny Bansal, founders of Flipkart. Pic: Flipkart

Flipkart inches closer to $1.5b funding from eBay and Tencent

FLIPKART is close to sealing a US$1.5 billion funding round led by eBay and Chinese internet company Tencent.

The deal could see the Indian arm of eBay become part of Flipkart, sources told The Economic Times, and the company is also exploring further funding from a third investor. But as with other recent funding rounds in India’s flagging start up space the latest deal will see the company’s value drop.

Flipkart’s peak value hit US$15.2 billion, but the latest round is likely to be at the US$10-US$12 billion level. But the company needs the funds to fight off competition from Amazon India, which received a US$1 billion cash injection from its US parent company last year and Paytm’s online marketplace that received a US$200 million backing from Chinese e-commerce giant Alibaba earlier this month.

SEE ALSO: India: Flipkart marks its own valuation down amid investor caution

“The current round of funding will provide a much-needed boost and improve the sentiment towards e-commerce and the overall startup sector in India. Apart from the company, the e-commerce ecosystem partners such as logistics companies and others will benefit,” Sreedhar Prasad, partner for e-commerce and startups at KPMG India, told ET.

Flipkart, Tencent and eBay have all declined to comment on the reports, but of the deal goes through it will be the largest capital infusion for an Indian internet startup since Flipkart received US$1 billion in July 2014.

SEE ALSO: Coming down: Indian startups face funding drought as bad news pours in

The news comes just a few days after the Indian e-commerce player announced a plan to expand its logistics network to smaller towns and cities to boost growth and entrench its position as India’s largest online retailer.

“In the next six months (we) will set up 100 (new) delivery hubs,” Nitin Seth, chief operating officer at Flipkart told ET: “E-commerce is no more a large-city phenomenon, our strategy is very focused on middle India.”