eBay Inc. gets 5.4pc stake in Flipkart after the merger of its India arm
After the acquisition of its India arm by e-commerce major Flipkart, eBay Inc. has now got 5.4 percent stake in the home-grown online marketplace. Flipkart had completed its acquisition formalities in August, although the acquisition was announced in April 2017.
According to a report in The Economic Times, eBay India was bought out for $211 million, and the US-based parent company also invested another $514 million in Flipkart this year. It has quoted US Securities and Exchange Commission’s statement that eBay Inc. had gained $167 million through the sale of its India arm to Flipkart.
The SEC report says, “During the third quarter of 2017, we received a 5.44 percent ownership interest in Flipkart in exchange for our eBay India business and a $500 million cash investment, resulting in a cost method investment of $725 million."
The eBay story
eBay was launched in India in 2005, two years before Flipkart’s arrival, a year after it acquired Baazee.com for about $50 million. But it was never able to capitalise on this first-mover advantage, while Flipkart, Snapdeal, ShopClues, and Amazon were all able to race ahead of the company.
Post-merger, Flipkart and eBay have signed an exclusive cross-border trade agreement so that their customers can access the inventory of each other’s sellers. In a way, Flipkart and eBay complement each other. eBay is focussed on consumer-to-consumer (C2C) transactions, and lets sellers list used goods and also refurbished goods. Flipkart, on the other hand, only lists sellers who sell brand new products, and does not allow C2C sales.
An earlier media report had said that the products which Flipkart receives from its customers through exchange programmes would be sold on eBay. At present, eBay continues to operate as an independent entity.
Snapdeal’s loss, Flipkart’s gain
eBay’s investment in Snapdeal in 2013 was expected to be a precursor to a merger of the two entities, but that never happened. In 2015, the San Jose-headquartered company sold part of its stake in Snapdeal.
Earlier this year, Snapdeal began talks with Flipkart for a merger, although that did not happen either. This turned out to be a blessing for Flipkart – which had already acquired fashion portals Myntra and Jabong, digital payments platform PhonePe, startups like LetsBuy and Jeeves for customer services, and built its own logistics arm Ekart, together forming the ‘Flipkart Group’. With eBay in tow, Flipkart is now looking at a larger customer base, which strengthens its effort for profitability.