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ETtech Exclusive: Accel, Tiger Global may exit Flipkart in $1.5B share sale – Economic Times

Two of the early backers of Flipkart — venture fund Accel Partners and New York-based investment firm Tiger Global are in talks to sell their remaining stake in the ecommerce company — which collectively amounts to about 5% — to its parent Walmart, multiple people aware of the development told ET. The Bentonville-based American retail giant could pay around $1.5 billion for this share purchase, they said.

While Accel owns a little over 1% stake, Tiger Global currently holds about 4% in Flipkart. Once a deal is finalised, Walmart’s stake in Flipkart will increase from its current holding of 72%.

“They (Accel and Tiger) want to sell and exit now fully. The discussions are moving ahead and the transaction will close in due time,” said one person cited above. “It is a significant moment for both Accel and Tiger Global having taken an (early) bet on the company and now leading to another cash exit.”

Both investment firms are exiting from Flipkart largely because they need to return money to their limited partners or sponsors from funds that are nearing the end of the maturity cycle.

Walmart’s move to buy out Flipkart’s earliest investors Accel and Tiger Global comes close on the heels of its $1 billion infusion in payments firm PhonePe through primary and secondary investments.

For Accel, which first invested in Flipkart in 2009, the latest deal is expected to fetch returns of around $350 million as it completely exits the company. Beginning with an initial investment of $1 million, Accel had over time pumped in a total of about $100 million in the company founded by Sachin Bansal and Binny Bansal in 2007.

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The venture fund had clocked mega returns of about $1 billion when it sold partial stake at the time of Walmart’s $16 billion acquisition of Flipkart in 2018.As for Tiger Global — this final sale of its stake to Walmart — will deliver significant payout and mark the culmination of an investment cycle triggered by Lee Fixel, a former partner in the NY firm who led its investments in Flipkart. Fixel would later deepen Tiger Global’s India bets with investments in a slew of startups like Freshworks, Delhivery, Ola and Razorpay.

Another Flipkart exit out for delivery_Graphic_JAN_2023_ETTECHETtech

At the time of the Walmart acquisition of Flipkart in 2018, Tiger Global had earned about $2 billion (current dollar-rate) from its partial stake sale. To be sure, Tiger Global is also fighting a case against Indian tax authorities over a tax demand on this exit.

Fixel left the fund in 2019 to start his own fund named Addition. Scott Shleifer, head for private investments, at Tiger Global now overlooks the India market along with colleagues like Alex Cook.

Emails sent to Accel and Flipkart did not elicit any response till press time Wednesday. A spokesperson for Tiger Global declined to comment.

“We don’t comment on speculation about our business,” a spokesperson for Walmart said.

Flipkart group CEO Kalyan Krishnamurthy was also a former Tiger Global executive and was involved in the Flipkart investment along with Fixel. He first joined the ecommerce firm as its chief financial officer before eventually taking on his current role.

Flipkart_s shareholding pattern_Graphic_JAN_2023_ETTECHETtech

Walmart India bet

The ongoing talks to offer an exit to Accel and Tiger Global come at a time when there is a liquidity squeeze globally and in India. This indicates the steady faith that Walmart maintains in the India market through its bets like Flipkart and PhonePe. The payments company recently separated from erstwhile parent firm Flipkart.

As part of the PhonePe transaction, ET first reported that Flipkart employees — current and former — will receive a one-time cash payout to the tune of $700 million. Krishnamurthy confirmed the payout to employees in an internal note while announcing the PhonePe separation. The employee group, which holds stock options in the ecommerce firm, is not investing in PhonePe’s new unit and the staff payout is for the value of PhonePe in their holding.

As reported by ET, Walmart is investing over $1 billion in PhonePe’s ongoing funding round — including secondary share sales — taking the total to about $1.5-2 billion in size.

PhonePe has raised $350 million in the first tranche from General Atlantic at a pre-money valuation of $12 billion as part of the ongoing funding round.

As part of the separation, Flipkart’s valuation is also getting re-adjusted to around $33 billion as against $37.6 billion in 2021. For Flipkart, it has steadily now maintained market share leadership across the country during business-as-usual as well as the flagship festive period sales.

ET reported earlier this month saying Flipkart’s India marketplace arm had received a $90 million cash infusion from Singapore parent. While Flipkart was initially considering to go for an initial public offering in 2023, the plans are on hold for now due to changes in global macroeconomic volatility.

Tiger territory

Tiger Global has been one of the key believers in Flipkart and has doubled down on the firm even when investors like General Atlantic walked away from investing in it.

However, Tiger Global has also seen a significant drop in valuation of its tech bets globally — private and public. India, still remains its key focus. ET had reported in October 2022 citing an internal note to Tiger’s investors that India grabbed multiple mentions in its outlook for a potential new fund — about $6 billion in size and much smaller than initially anticipated in size.

“We anticipate that PIP (Tiger Global Private Investment Partners) 16 will similarly benefit from the differentiated access to compelling early-stage investments largely in enterprise themes and in India and will do so in a lower-valuation market […]. In India, where we have built a leading brand and portfolio over more than 15 years, both B2B and consumer categories are significantly under penetrated relative to other large markets,” according to the letter.

Tiger Global closed a $12.7 billion technology fund in 2021. But, a smaller new fund signals the first big downturn in over two decades for the technology world globally.

In India, executives like Cook and Shleifer have reiterated their commitment to the local entrepreneurs. ET reported about both Shleifer and Cook visiting India. According to people who met them, the fund is still aggressive on its India outlook and is doubling down on early-stage deals to join companies early on.

Tiger Global’s new bets in India include local language social media firm ShareChat, business-to-business ecommerce firm for raw material procurement OfBusiness and fintech Cred, among others.

Illustration and graphics by Rahul Awasthi