InvestorQ : Is it true that Tencent is planning to take a stake in Flipkart?
manisha Kolvenkar made post

Is it true that Tencent is planning to take a stake in Flipkart?

Crowny Pinto answered.
3 years ago

One of China’s most powerful technology companies, Tencent, is reportedly investing $62.8 million in Flipkart, the e-commerce Indian company owned by Wal-Mart of the US. The news is yet to be confirmed by the relevant parties to the deal.

The investment is a tad surprising because it comes in the midst of escalating Indo-China tensions. In the last few months, India has banned scores of Chinese on security grounds and also put severe restrictions on Chinese FDI into India by putting them under scrutiny.

It may be recollected that Wal-Mart had announced an infusion of $1.2-billion into Flipkart in July but due to the lockdown there has been little progress. Clearly, Wal-Mart is also looking to de-risk its financial commitment to an extent.

According to a report in a venture capital website, Tencent already holds a stake in the range of 4.5% to 5% in Flipkart due to some indirect acquisitions done by Tencent. This is likely to be an addition to that stake and the first big Chinese investment in some time.

Some experts are of the view that this could be Tencent’s de-risking strategy to take a stake in the India growth story at a time when the restrictions are increasing by the day. Flipkart is a Singapore headquartered company and will not attract Indian domestic laws.

In fact some of the tax experts have noted that such indirect and backdoor structures are becoming the norm for Chinese companies that are facing restrictions. Buying stakes in foreign domiciled holding companies is one such method of evading the rules.

India also realizes that only China has the ability to take the risk to bankroll the Indian start-up ecosystem and hence India cannot afford to lose out on that advantage. Ant Financial and Tencent have been two of the largest start up investors in India over the years.