In a move that should strengthen both firms, US headquartered e-commerce firm eBay plans to merge its Indian arm eBay.in with India’s leading e-commerce firm, Flipkart, and invest $500 million in the latter.

Nasdaq-listed eBay is part of a consortium of investors, including Microsoft and Tencent, that is understood to be collectively investing $1.5-2 billion in Flipkart, as the latter looks to take on Amazon and Alibaba (which is set to enter India this Diwali season).

The sudden exit of Latif Nathani, V-P and MD of eBay India, earlier this month may perhaps have been an indication of how things were shaping up. Nathani cited personal reasons for moving back to the US.

Despite its first-mover advantage in India, a market it entered with the acquisition of Baazee.com, eBay has been relegated to the background with start-ups such as Paytm and Shopclues surging ahead and making a significant dent in the e-commerce market.

According to former eBay executives, the investment and merger with Flipkart will help bring eBay back into the e-commerce game with a heavier arsenal of offerings.

“The combined seller base of eBay, Flipkart, Jabong and Myntra will undeniably make it one of the strongest e-commerce entities in India. Some of eBay’s categories, such as collectibles, coins and notes, stamps and charity will enhance Flipkart’s offering to Indian online shoppers, giving it an edge over other e-commerce firms,” said a former executive.

While eBay will receive a shot in the arm with a second chance at increasing its revenue, Flipkart will get some much-needed funding, a seller base and category enhancement to counter both Amazon and Alibaba, which will enter the market through Paytm, in which it is invested.

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