Walmart-Flipkart deal: A look at the successful exits of Indian e-commerce

Walmart Inc on Wednesday announced it had signed agreements to become the largest shareholder in Flipkart - the world's largest retailer would pay $16 billion for an initial stake of approximately 77 per cent in Flipkart, India's largest e-commerce company with a gross merchandise value (GMV) of $7.5 billion and net sales of $4.6 billion in 2017/18.

The sale, one of the biggest e-commerce deals in the world, puts the limelight on venture capital and private equity exits, which has proved difficult in the Indian context, thus far. All the three exit routes - IPOs, acquisitions, and big secondary sales - have been few and far between. This has constrained the Indian start-up industry.

The Walmart deal is a sign things are changing. Flipkart's Japanese investor SoftBank has exited selling 20 per cent of its stake. Co-founder Sachin Bansal has exited as well. The 23 per cent remaining stake in Flipkart will now be held by co-founder Binny Bansal, Tencent Holdings Limited, Tiger Global Management LLC and Microsoft Corp.

Here's a snapshot of how exits looked in the Indian e-commerce space in the last five years.

1. According to data from Venture Intelligence, since 2013, PE and venture capital firms that have managed exits in the Indian e-commerce space include CDC Group, Rocket Internet,  Helion Ventures, Seedfund, Inventus Capital Partners, Ascent Capital, Zodius Capital, Lionrock Capital, Intel Capital, Norwest, IDG Ventures India, Rajasthan VC, Capital18, Reliance Venture, Valiant Capital, Vertex, Kalaari Capital, Bessemer, SAIF, Tiger Global, Accel India, Iconiq Capital, DST Global, GIC, Vulcan Capital, DST Global, Sofina.

2. Acquirers include SoftBank Corp, Stanley F Druckenmiller, Naspers, Alibaba, Abraaj Group, IFC, and Flipkart.

3. The exit story in the Indian e-commerce really started in 2013 when Helion Ventures, Seedfund, and Inventus Capital Partners sold off their stake in Redbus to Naspers. Data from Venture Intelligence, however, is revealing. The size of the exits was under $100 million till 2014. The first there digit exits came in March 2015 - SAIF's stake in MakeMytrip was sold in a public market sale ($113 million) while IDG Ventures India sold its stake in Flipkart in a secondary sale worth $150 million. The biggest acquirer prior to the Walmart deal, incidentally, was a buyback of Flipkart shares worth $718 million in August 2017. Tiger Global was the major beneficiary.

4. Data from Venture Intelligence also tells us that investors in Flipkart partly or fully exited at least three times over the past five years. Apart from Tiger Global, they include IDG Ventures India, Accel India, Iconiq Capital, and DST Global among others.  

5. Traditional Indian businesses have been shy - they haven't made any big ticket purchase in the e-commerce space. Now, a multinational buying a lion's share in Flipkart changes around things. This underlines that the market is maturing and attests that multi-billion dollar exits are possible in India. More VC money is likely to flow into the start-up ecosystem.