In the biggest investment ever by an investor in any Indian e-commerce firm, Japanese internet and telecommunications group SoftBank has put in $627 million (Rs 3,847 crore) in Snapdeal, becoming the largest shareholder in the online marketplace major.
Snapdeal will use the investments in expanding its chain of fulfillment centres and make acquisitions in the coming few months, specifically in the area of mobile technology. With mobile commerce fast gaining pace in the country, the firm also plans to set up an incubation centre to hone and harness start-up businesses in the mobile technology space within next six months.
With this investment, Snapdeal has raised around $1 billion this calendar year.
The Delhi-headquartered online retailer which was founded by Wharton graduate Kunal Bahl and IIT Delhi alumnus Rohit Bansal in 2010, received $133.7 million in February from investors led by Chinese e-commerce company eBay and $105 million in May from a group of investors, including IT billionaire Azim Premji's family office Premji Invest.
The company has also got investment backing from Tata group chairman emeritus Ratan Tata. Besides SoftBank, a few existing investors participated in the latest fund raising in Snapdeal.
The online marketplace claims to have 25 million users and 50,000 sellers on its platform.
Through this strategic investment and partnership with Snapdeal, the SoftBank Group aims to further strengthen its presence in India and leverage synergies with its network of Internet companies around the world, Snapdeal said in a statement.
Consequent to the strategic investment by SoftBank, its vice-chairman Nikesh Arora will join the board of Snapdeal.
This substantial investment is a major highlight of the SoftBank chairman and CEO Masayoshi Son's meeting with Prime Minister Narendra Modi on Monday. Son announced a $10 billion investment in Indian internet, telecommunication and aviation companies.
"We believe India is at a turning point in its development and have confidence that India will grow strongly over the next decade. As part of this belief, we intend to deploy significant capital in India over the next few years to support the development of the market," Son said in a statement in Bangalore.
Nikesh Arora, SoftBank Corp vice-chairman and CEO of SIMI, said, "India has the third-largest Internet user base in the world, but a relatively small online market currently. This situation means India has, with better, faster and cheaper Internet access, a big growth potential."
SoftBank has now become the lead investor in $210 million (Rs 1289 crore) fund raising by another internet firm Bangalore-based Ola, the company said on Tuesday.
Its investment in Snapdeal comes four months after its rival, Bangalore-based Flipkart, raised $1 billion from a clutch of investors including Singapore government's sovereign wealth fund, besides existing PE firms such as Accel Partners that took its valuation to $7 billion (Rs 42,000 crore).
Homegrown e-commerce firms Flipkart and Snapdeal are facing intense competition from global major Amazon, which had announced $2 billion investment to ramp up business in India.
SoftBank, has hit a jackpot with Chinese e-commerce giant Alibaba as its 32% stake is currently valued $60 billion. It now looks to cash in on increasing online retail in India through investments in a host of emerging internet companies in the country.
Kunal Bahl, co-founder and CEO of Snapdeal, said that with the support of Softbank, the company is confident of further strengthening "our promise to consumers and create life changing experiences for 1 million small businesses in India."
Earlier this year, Snapdeal had raised $133.77 million in a round led by eBay and $105 million from institutional investors, including Temasek, Myriad, Tybourne, Blackrock Inc. and Premji Invest.
A report by consulting firm Technopak pegs the $2.3 billion e-tailing market to reach $32 billion by 2020. Another report by consultancy firm PwC and industry body Assocham suggests that e-commerce firms are expected to spend up to $1.9 billion by 2017-2020 on infrastructure, logistics and warehousing.