Tencent buys stake worth $264 mn in Flipkart from co-founder Binny Bansal

Chinese tech giant Tencent bought a $264 million (about Rs 2,060 crore) stake in Walmart-owned e-commerce company Flipkart from its co-founder, Benny Bansal through its European subsidiary, according to the sources.

The transaction was completed on October 26, 2021. However, it was shared with government authorities earlier this fiscal year. Flipkart is registered in Singapore and has operations only in India.

Binny Bansal now holds around 1.84 percent in Flipkart after selling part of her stake to Tencent Cloud Europe BV. The story was first reported by the PTI news agency.

“Tencent is one of the early investors in Flipkart and this deal came about last year when SoftBank along with several sovereign wealth funds invested $3.6 billion in Flipkart,” said a person familiar with the matter. "At that time, Binny Bansal diluted part of his stake to Tencent.”

Following this transaction, the Tencent arm owns 0.72 per stake in Flipkart, valued at approximately $264 million.

The government introduced Press Note 3 (series 2020) during the early days of the pandemic in April 2020. It was an immediate reaction to concerns by Indian companies that they were vulnerable to opportunistic takeovers during the pandemic. Press release 3 requires that all investments by entities that are domiciled in a bordering country, or where the ultimate beneficiary of the investment is located in a contiguous land country, must be made under an 'approval pathway' and will require authorization from security.

However, the Tencent-Bansal deal does not fall under the purview of "Press Release 3," according to the sources.

“This is because Tencent's stake is less than 1 percent and Flipkart was a registered entity in Singapore,” one person said.

In July of last year, Flipkart Group carved out its own place in the global league by raising $3.6 billion, including from SoftBank, which exited the company, valuing the company at $37.6 billion, a 50 percent increase. in cents in a year.

In July 2020, Walmart led a $1.2 billion Flipkart round, valuing the e-commerce company at $24.9 billion. In September 2020, Tencent invested $62.8 million in Flipkart, according to a report by business intelligence platform Paper.vc.

The investment comes amid tensions between China and India, including bans on Chinese apps and changes to foreign direct investment (FDI) rules and prior clearance mechanisms for investments from China.

The funding, the largest of any Indian startup ecosystem, was led by financial investors GIC, Canada Pension Plan Investment Board (CPP Investments), SoftBank Vision 2 Fund and Walmart, along with investment funds. sovereigns DisruptAD, a Qatar Investments agency, and the Berhad National Treasury.

Other marquee investors include Tencent, Willoughby Capital, Antara Capital, Franklin Templeton, and Tiger Global. This fundraiser provides enough firepower for Flipkart to compete with Amazon, Reliance JioMart and Tata Digital.

A Flipkart spokesperson declined to comment on this development.

Flipkart's $16 billion acquisition of Walmart in 2018 not only provided huge outflows for its investors, but also made founders Sachin and Binny Bansal billionaires. Both Sachin and Binny are now active in the Indian startup ecosystem, supporting a number of promising startups through their personal funds and family offices.

Chinese investors such as Alibaba, Tencent and Xiaomi are also active in the field of Indian startups and have collectively invested billions of dollars. Tencent has invested more than $2 billion in Indian startups since 2016. Last year it also invested more than $200 million in the Indian social media platform ShareChat.

India is considering easing the scrutiny of some foreign direct investments, after rules targeting mainly China created a bottleneck for inflows, according to a Bloomberg report. The government is currently evaluating all investment proposals from companies that are based in countries that share a land border with India or have an investor from one of these countries, according to the report. The report says the government is now considering excluding proposals where the alleged percentage of real ownership is less than 10 percent, meaning the investor may be from a neighboring country but holds only a small stake in the firm proposing the investment.

Also Read: India's FDI ranks up a notch in 2021 even as inflows dip