$12-bn Flipkart-Walmart deal: Investors expect to strike rich

Tiger Global’s reward for being one of the oldest investors in e-commerce giant Flipkart could be $4 billion.

With Walmart Inc. being close to finalising a deal to buy a majority stake in the Bengaluru-based e-commerce firm for at least $12 billion, investors are expecting to strike it rich.

Flipkart’s founders Sachin Bansal and Binny Bansal, if they sell a substantial part of their 11 per cent stake, could make close to $1 billion each. However, sources said the two might not exit the firm. The windfall would mark the biggest payout given to any investor of Indian start-ups in the past 15 years.

According to industry analysts, early-stage investors including Tiger Global, Accel Partners, and Naspers are set to earn between $1.2 billion and $4 billion once the Walmart-Flipkart merger goes through. They could get four to five times their investments.

According to the data sourced from business intelligence platform Paper.vc, Tiger Global owns a little more than 20 per cent, Naspers close to 13 per cent, and Accel around 6.44 per cent in Flipkart. Experts say all these players are planning to exit the firm because the company’s valuation, at $20 billion, is at its peak.

“Things have fallen into place for investors such as Tiger Global and Accel Partners, who stayed invested in the company through tough times. If they exit, they would do so at the best possible valuation at this point,” said a senior consultant with an international consultancy.

Tiger Global, which invested around $1.5 billion in the firm, has guided the company at a time when its valuation dipped and helped it turn around. That led to SoftBank putting in $2.5 billion in Flipkart.

However, among all these players, the biggest winner would be Accel Partners, which was the first institutional investor in Flipkart, and put in a million dollars in 2009. Since then it has periodically invested close to $300 million, according to market estimates, and would now earn four times what it had invested.

With Walmart eyeing a 55-70 per cent stake in Flipkart, most smaller investors would be selling their stakes at a premium in secondary share sales. More than 30 smaller investors would make $20-200 million because most of them would be exiting after the merger.

While it is not known how much SoftBank Group might offload of its 20.79 per cent in Flipkart, industry experts say it might sell around 10 per cent to Walmart for about $2 billion.

“If they do this stake sale, in just 11 months they would recover most of the $2.5 billion they spent on acquiring the 20 per cent in the company. Rarely do such things happen in the e-commerce world,” said a senior executive at one of the firms SoftBank has invested in.

A dispute over the company’s valuation held back the US retail giant from signing the term sheet for a few weeks. Amazon also threw its hat in the ring, and, according to reports, was ready to pay a breakup fee of almost $2 billion.

Investment numbers are market estimates; this table does not include 30-odd investors who might also exit the company at the time of the deal; Flipkart was founded in 2007.