technology

Flipkart on the hunt


Good morning,

Flipkart, which plans to go public towards the end of the fiscal, is in talks to raise at least $1 billion—and up to $2 billion—from a group of investors.

Also in this letter:

  • Banks’ cryptic rules for crypto
  • Karnataka bars ‘non-essentials’
  • Check for beds, oxygen on Google Maps

IPO-bound Flipkart in early talks to raise $1 billion

flipkart

Flipkart is in preliminary discussions with a clutch of new investors to try and raise $1 billion, several sources have told us. The news comes even as the Walmart Inc.-owned company weighs an initial public offering (IPO) in the US around the fourth quarter of this year.

The amount raised could be as high as $2 billion, depending on investor appetite. Flipkart would use the money to fund expansion, catalyse its sum-of-parts valuation and compete better with Amazon.com Inc. and Reliance Industries Ltd., the sources said.

State of play: A new investor pool—that includes sovereign wealth funds, technology-focused financial groups, pension funds, long-term passive funds and private equity funds—has already been sounded out. Discussions are at an early stage and may or may not lead to a transaction.

Not a pre-IPO round: “The capital raise is not being positioned as pre-IPO but for expansion. The management believes there is a lot of value that is trapped in each of its key verticals, and the value of parts is more than the whole,” said a Flipkart official involved in the negotiations. “The price discovery process is still ongoing. Simultaneously the US listing plans are ongoing with SPAC as a backup option.”

Why, Walmart? Some analysts are surprised that Walmart is not infusing fresh capital into Flipkart and instead tapping external investors. Some however argue that raising money from external investors at this stage may help the company’s valuation.

Valuation: Flipkart’s valuation for this round is expected to be around $28-$30 billion, higher than it was the last time the firm raised money, but lower than the $35-40 billion valuation it is expected to hit once it goes public.

According to data intelligence platform Tracxn, Walmart invested $1.2 billion in Flipkart last July, at a valuation of $24.56 billion, to increase its shareholding to 77.8%. That round also saw existing investors Qatar Investment Authority and Tencent invest another combined $79.1 million in the company. This was its first major cash infusion since Walmart acquired around 77% of Flipkart for around $16 billion in 2018, at a $21 billion valuation. At that time, the US retailer had pledged to take Flipkart public in four years.

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Flipkart shareholding pattern, according to Tracxn:

  • Walmart: 77.8%
  • Tencent: 5%
  • QIA: 1.5%
  • Tiger Global: 4.5%,
  • Binny Bansal: 3.3%
  • ESOP Pool: 5.1%
  • Others (Accel, GIC Singapore, Microsoft, UBS): 2.8%

Cryptic rules leave crypto industry struggling

RBI

Over the past week or so, major banks including ICICI Bank and IndusInd Bank have told payment gateway partners to stop processing the transactions of cryptocurrency exchanges.

Other big banks, including HDFC Bank, Yes Bank, State Bank of India and Kotak Mahindra Bank had been declining such transactions since even earlier.

Now, numerous sources have told us that the banks enforced these “informal instructions” over concerns around money laundering at Indian crypto exchanges, the recent Dogecoin frenzy, and aggressive advertising by crypto exchanges around the IPL.

Regulation by stealth: However, none of the banks or gateways have issued any written instructions stating their reasons for imposing these curbs, triggering confusion among cryptocurrency exchanges and investors alike.

Banking industry insiders said this could be because of similar “informal” (i.e. unwritten) instructions that the Reserve Bank of India (RBI) has given banks. Several sources told us that the RBI issued these instructions to banks as it feels India’s crypto ecosystem is growing without any regulatory oversight.

“Since the RBI has issued no formal instructions or circular, you can’t even protest,” said a crypto industry source. “It’s like a stealthy way of creating issues for crypto exchanges, which is very unfortunate.” Many crypto exchanges are now relying on wallet services and smaller banks to keep their businesses running.

Exchanges plan for battle: Crypto platforms said that they now plan to remind all major banks about the Supreme Court’s ruling of February 2020, which revoked a 2018 RBI circular that had banned banks from working with crypto exchanges.

“We’re planning to first send letters to banks informing them about the Supreme Court order so that they’re formally made aware of the court’s ruling,” said a crypto industry official.

Gateways caught in the middle: An executive at a payment gateway told us, “We reached out to all our cryptocurrency clients on the instructions of our partner bank to enquire about their arbitrage settlement process. We want to ensure compliance with anti-money laundering rules. [Crypto] is a lucrative business for us, but chargeback fees in the event of fraud—which are rather high—fall on banks and payment gateways.

Tweet of the day


Karnataka bars ‘non-essential’ deliveries

ECOMMERCE

Karnataka has become the latest state to restrict e-commerce firms to shipping only “essentials”.

  • The state government imposed a stricter lockdown from May 10, restricting e-commerce platforms from shipping non-essential goods.
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What’s happening? Leading e-commerce platforms including Flipkart, Amazon and Reliance Digital were until Monday evening taking orders for goods such as laptops, tablets, headphones, WiFi routers, small electronics, apparel, accessories and some appliances as well, ET has found. They had, however, suspended orders for smartphones, watches, footwear and some other key categories.

Policy flip-flop: An earlier notification dated May 7, issued by Chief Secretary P Ravi Kumar, had permitted “delivery of all items through e-commerce and home delivery.” It is not clear what led to this flip-flop in the space of just 48 hours.

What are essentials? This comes at a time when e-commerce firms are negotiating a maze of conflicting regulations as state governments announce a series of measures to stem the rapid rise in Covid-19 cases.


Twitter memes gatecrash weddings amid Covid-19

WEDDING

Memes and posts criticising people for organising weddings that flout precautionary guidelines have started to emerge amid the flood of SOS tweets from people looking for help with Covid emergencies.

Why it matters: Even as the second wave of the pandemic rages across the country, social events such as weddings, characterised as super-spreaders, continue unabated despite multiple reports of such gatherings leading to Covid-related deaths in various parts of the country.

Hard to say ‘no’: Behavioural scientists and anthropologists note that many people are reluctantly attending these super-spreader events because they are unable to say no. Many familial and societal relationships are solely built on the promise of “being there in times of need” and weddings and death ceremonies are considered prime occasions in that context.

Infographic Insight

SoftBank Vision Fund (SVF) is the largest shareholder in Grofers with a stake of about 52%.

Top shareholders


HDFC Bank gets 1.5% of CSC Grameen Store

HDFC Bank has bought 1.5% stake in CSC Grameen eStore for about Rs 10 crore. ET had reported in December that the venture is in talks with HDFC Bank for a possible stake sale.

  • The digital arm of the Tata Group — Tata Digital — had purchased a similar stake in the government-run rural ecommerce venture.

Why it matters: India’s largest private sector lender is looking at the platform to extend the reach of its products and services — especially the banking portfolio — in rural areas, top executives said. The Grameen eStore, launched last April, offers a huge range of products including local handicrafts, groceries and consumer durables in far-flung areas. It has hit revenues of Rs 250 crore within a year of its launch.

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In other deal news, Fewcents, a fintech-for-media startup that provides solutions for digital publishers and creators to monetise their content, has raised $1.6 million (about Rs 11.7 crore) in funding from M Venture Partners, Hustle Fund and others.


Now check for hospital beds, oxygen on Google Maps

Search giant Google has rolled out a pilot on hospital beds and medical oxygen availability, as part of the company’s efforts to help India cope with the second Covid-19 wave.

What’s the plan? Google said it was testing a new feature using the Q&A function in Maps that enables people to seek and share local information on availability of beds and medical oxygen in select locations. The tech giant has also rolled out a Covid Aid campaign on Google Pay so that people can contribute to non-profit organisations.

This comes days after social media platforms were asked to curb fake news and misinformation related to the pandemic. The government on Friday sent an advisory to platforms – such as Facebook, WhatsApp, Twitter and Instagram — to “initiate awareness campaigns” among users to not circulate “any false news or misinformation” that is likely to create “panic among the public and disturb the public order”.


Top Stories We Are Covering

Facebook told to cancel Instagram for younger kids: A group of 40 state attorneys general on Monday urged Facebook Chief Executive Mark Zuckerberg to abandon plans to launch a version of Instagram for children under the age of 13.

Engineering R&D firms set for broad-based growth: Engineering services companies are likely to see broad-based growth in the coming years, driven by ramping up of deals won earlier in 2021 and an increase in outsourcing and offshoring activity. Within the engineering R&D space, market watchers expect segments like communication and healthcare to grow well.

Wage based visa in the US to impact international students: A Trump era regulation calling to end the lottery-based system of allocating H-1B visas in favour of a wage-based system will make it harder for international students to get a work permit in the US, according to a new study.


Global Picks We Are Reading

■ A leaked Walmart memo highlights the daunting challenges facing the world’s largest retailer (Recode)

■ Pentagon weighs ending JEDI cloud project amid Amazon court fight (WSJ)

■ UBS explores offering crypto investments to rich clients (Bloomberg)

Today’s ETtech Morning Dispatch was curated by Zaheer Merchant and Karan Dhar in Mumbai.





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