The merger between homegrown e-commerce major Flipkart and eBay India has been approved by the Competition Commission of India (CCI).
On 15 June, the CCI notified its decision to approve eBay’s subscription of Flipkart’s shares issued by its Singapore-headquartered entity. “CCI India approves subscription by eBay Singapore of CCPS issued by Flipkart and acquisition of eBay India by Flipkart,” the regulator tweeted.
The CCI’s approval is paramount for the formal completion of any acquisition and merger deals in the country.
In April this year, eBay Inc. had invested $500 million into Flipkart and sold its India business to the company to pick up a stake in Flipkart. The infusion of funds was part of a $1.4 billion fundraising round. The company had, however, said that eBay.in will continue to operate as an independent entity.
VCCircle had earlier reported that the merger deal was more an eagerness on part of Flipkart to keep the funding tap flowing rather than a good value proposition. A constant flow of external funding has become an essential part of Flipkart’s strategy to effect a turnaround and stay relevant in its all-out war with the fund-flushed US e-commerce behemoth Amazon.
“It’s not that Flipkart needs eBay; what it needs is the money. I’m not very sure if eBay can bring anything extra to the table because it could not make much of an impact in India despite being here for such a long time. It could give them a graceful exit from India rather than shutting operations or withdrawing,” Arvind Singhal, chairman at retail consultancy Technopak had told VCCircle.
Flipkart and eBay have also signed an exclusive cross-border trade agreement. This will allow customers of the Indian e-tailer access eBay’s global inventory. In return, eBay’s customers will have access to unique Indian inventory provided by Flipkart sellers.
Earlier this week, Financial Express had reported that Flipkart has shut down its global sourcing platform for its sellers and has instead decided to focus on getting this done through eBay’s global sourcing platform.
Ebay entered India in 2004 through its acquisition of Baazee.com India Pvt. Ltd from global media conglomerate News Corp and other investors for Rs 230 crore ($50 million back then). News Corp also owns the parent of this news website.
eBay had an early-mover advantage in India, but it could never manage to capitalise on it and lost to younger rivals Flipkart, Snapdeal and its American rival Amazon.