FLIPKART & E-BAY

SEE REPORT

Prepared by
Gangani Ravi
Enrollment No.
20FOMBC11006

For the submission of

SEE

Guided by
Prof Kavita Balani
Submission to:
School of management R.K.
University,
Rajkot.

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Preface

As a part of the B.com Curriculum and in order to gain

practical Knowledge of Merger & Acquisition, we are required to
make a report on Acquisition of FLIPKART & E-BAY. The Basic
Objective behind doing this project report is to get knowledge OF
Merger & Acquisition.

In this project report we have included various concepts,

Ratio and Analysis regarding Acquisition of FLIPKART & E-BAY

Doing this Project report helped us to enhance our

knowledge regarding Acquisition of FLIPKART & E-BAY. We do
undergo many experiences related to our topic concepts. Through
this report we come to know about the importance of Acquisition

towards the work.

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Acknowledgement

I would like to express my special thanks to my professor

“Kavita Balani” for her able guidance and support in
completing my Project.

I would also like to extend my gratitude to the director sir

"Dr. Chintan Rajani” for providing me with all the
facilities that were required.

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 Index
Sr. Particular Page no.
no.

1. Introduction 5
2. Background of Acquisition 7
2.1. FLipkart
2.2. Ebay
3. Reason of Acquisition 9
4. The Deal Highlight 10
5. Challenges of The Acquisition 13
6. Financial Analysis 16
6.1. Pre & Post Acquisition Analysis 16
Key Financial Ratios of Flipkart 17
6.2. (pre- Acquisition)
Key Financial Ratios of Ebay 19
6.3. (pre- Acquisition)
7. Interpretation 23
8. Analysis of Financial performance 23
9. Synergies From Acquisition 24
10. Conclusion 26
11. References 26

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 INTRODUCTION

 Flipkart Private Limited is an Indian e-commerce company,

headquartered in Bengaluru, and incorporated in Singapore as a private
limited company. The company initially focused on online book sales
before expanding into other product categories such as consumer
electronics, fashion, home essentials, groceries, and lifestyle products.
 In August 2018, American retail chain Walmart acquired a 77%
controlling stake in Flipkart for US$16 billion
 Flipkart is valued at $37.6 billion as of 2022

 eBay Inc. is an American multinational e-commerce company based

in San Jose, California, that facilitates consumer-to-
consumer and business-to-consumer sales through its website.
 eBay was founded by Pierre Omidyar in 1995 and became a notable
success story of the dot-com bubble.
 The website is free to use for buyers, but sellers are charged fees for
listing items after a limited number of free listings, and an additional or
separate fee when those items are sold.

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 BACKGROUND OF ACQUISITION

 In 2017, the Indian e-commerce company Flipkart acquired eBay India's

operations as part of a $1.4 billion investment round led by Tencent,
Microsoft, and eBay. The acquisition allowed Flipkart to access eBay's
global customer base, while eBay gained an equity stake in Flipkart

 The acquisition was seen as a significant move in the Indian e-commerce

market, which was dominated by Flipkart and Amazon. With the
acquisition, Flipkart gained access to eBay's 169 million active buyers
worldwide, allowing it to expand its reach and grow its customer base

 As part of the deal, eBay also agreed to make a $500 million cash
investment in Flipkart, giving it a 4.4% stake in the company. This
investment was seen as a significant endorsement of Flipkart's growth
potential and helped it to compete more effectively against Amazon in
the Indian market

 However, the Flipkart-eBay deal was not without controversy. In 2018,

Walmart announced that it was acquiring a majority stake in Flipkart for
$16 billion, which led to questions about the future of eBay's investment
in the company. In 2020, eBay sold its stake in Flipkart to Walmart for
$1.2 billion, effectively ending its involvement in the Indian e-commerce
market

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 REASON OF MERGER

 The merger of Flipkart and eBay was primarily driven by the desire to
strengthen Flipkart's position in the Indian e-commerce market and
expand its reach globally.

 By acquiring eBay India's operations, Flipkart gained access to eBay's

global customer base, which would allow it to expand its customer base
and offer a wider range of products. The deal also gave Flipkart access to
eBay's technology and infrastructure, which could help it improve its
platform and services

 For eBay, the deal provided an opportunity to enter the Indian market
through a strategic partnership with one of the country's leading e-
commerce companies. By investing in Flipkart, eBay could also benefit
from the company's growth potential and expand its presence in the
region.

 Overall, the merger was seen as a win-win for both companies, as it

allowed them to leverage their respective strengths and create new
opportunities for growth in the competitive e-commerce market.
 THE DEAL HIGHLIGHT

The Flipkart and eBay merger was a significant deal in the Indian e-commerce
market, and some of its highlights include:

1. Expansion of Flipkart's reach: Through the acquisition of eBay India's

operations, Flipkart gained access to eBay's global customer base, which
allowed it to expand its reach and grow its customer base.

2. Strategic partnership: The two companies agreed to enter into a strategic

partnership to jointly pursue cross-border trade opportunities and leverage
each other's technology and expertise.

3. Investment by eBay: eBay invested $500 million in Flipkart as part of a $1.4

billion funding round led by Tencent, Microsoft, and eBay. This investment was
seen as a significant endorsement of Flipkart's growth potential and helped it
to compete more effectively against Amazon in the Indian market.

4. Valuation of Flipkart: The funding round led by Tencent, Microsoft, and

eBay valued Flipkart at $11.6 billion, making it one of the most valuable e-
commerce companies in India.

5. Controversy: The deal was not without controversy, as some analysts

questioned the strategic fit between the two companies and the long-term
viability of eBay's investment in Flipkart. In 2020, eBay sold its stake in Flipkart
to Walmart for $1.2 billion, effectively ending its involvement in the Indian e-
commerce market

Overall, the Flipkart and eBay merger was a significant deal that helped to
strengthen Flipkart's position in the Indian e-commerce market and expand its
reach globally. However, the deal also highlights the challenges and
uncertainties that can arise in the rapidly evolving e-commerce industry.

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 Synergies expected from the Deal:

1. increased reach and customer base: Flipkart and eBay have a large
customer base, and the merger would enable them to reach a wider
audience. eBay, which exited the Indian market in 2018, would gain
access to Flipkart's vast customer base, while Flipkart would benefit from
eBay's global customer base.
2. Complementary strengths: Flipkart and eBay have complementary
strengths in terms of their product offerings and expertise. Flipkart is
known for its focus on fashion and mobiles, while eBay has a strong
presence in electronics and collectibles. By combining their strengths, the
companies would be able to offer a more diverse range of products to
their customers.
3. Cross-selling opportunities: The merger would enable the companies to
cross-sell their products and services to each other's customers. For
example, Flipkart could offer eBay's global products to its customers in
India, while eBay could offer Flipkart's products to its global customer
base.
4. Cost savings: The merger would lead to cost savings for the companies,
as they could share resources and infrastructure. This could include
sharing warehouses, logistics networks, and customer service centers.
5. Overall, the Flipkart-eBay merger was expected to create a stronger
player in the Indian e-commerce market by combining the strengths of
two leading companies. However, it is important to note that the deal did
not go through as planned, and eBay ended up selling its stake in Flipkart
to Walmart in 2018.

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 CHALLENGES OF ACQUISITION
1. Integration:
Integrating eBay India's operations with Flipkart's existing infrastructure was a major
challenge. Flipkart had to ensure that eBay India's technology, operations, and
employees were seamlessly integrated into its own systems. This required a
significant investment of time, money, and resources.

2. Branding:
Flipkart also had to figure out how to integrate eBay India's brand with its own. This
involved developing a new brand identity that would appeal to both Flipkart and
eBay India's existing customers

3. Cultural differences:
Flipkart is an Indian company, while eBay is an American company. The two
companies have different work cultures, and integrating them could be challenging.
Flipkart had to ensure that the cultures of the two companies were aligned to ensure
a smooth transition

4. Regulatory issues:
The acquisition had to go through regulatory approvals, which could be time-
consuming and complex. Flipkart had to navigate Indian laws and regulations, as well
as deal with the scrutiny of various government agencies

5. Competition:
Flipkart faced significant competition in the Indian e-commerce market. Amazon,
Snapdeal, and Paytm were all competing with Flipkart for market share. Acquiring
eBay India was seen as a strategic move to gain a competitive edge, but it was not a
guarantee of success.

Overall, the acquisition of eBay India by Flipkart was a complex process that required
significant planning, investment, and effort. Despite the challenges, the acquisition allowed
Flipkart to expand its reach and strengthen its position in the Indian e-commerce market

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 FINANCIAL ANALYSIS

PRE ACQUISITION ANALYSIS:

DEBT TO MARCH 2006 MARCH 2005 MARCH 2004
EQUITY:

Flipkart 0.19 0.42

0.05

Ebay 3.05 2.94 2.95

POST MERGER ANALYSIS

DEBT TO EQUITY: MARCH 2010 MARCH 2009 MARCH 2008

Flipkart 0.11 0.85 0.52

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KEY FINANCIAL RATIOS OF FLipkart (PRE
ACQUISITION)

KEY FINANCIAL RATIOS MAR 2016 MAR 2017 MAR 2018

OF TATA STEEL PVT &
CORUS STEEL LTD
PVT (in Rs. Cr.)

PER SHARE RATIOS

Basic EPS (Rs.) 1.32 1.30 2.94

Diluted EPS (Rs.) 2.94 1.32 1.30

Cash EPS (Rs.) 10.20 10.08 7.32

Book Value [Share (Rs.) 18.92 15.39 12.47

P/E Ratio 2.64 1.79 2.03

PROFITABILITY RATIOS

Net Profit Margin (%) 2.16 1.27 1.38

Return on Net worth / Equity (%) 15.52 8.57 10.25

Return on Capital Employed (%) 13.73 10.67 11.91

Return on Assets (%) 1.50 2.69 2.84

LIQUIDITY RATIOS

Current Ratio (X) 1.12 1.04 0.90

Quick Ratio (X) 1.11 1.02 0.87

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VALUATION RATIOS

Price/BV (X) 6.94 1.51 0.79

Earnings Yield 0.12 0.16 0.12

Enterprise Value (Cr.) 468.33 70.57 52.18

Retention Ratios (%) 79.47 79.28 78.86

BASIC INFORMATION

Sales/Revenue 15437.44 14717.56 10937.77

Operating Exp. 1466.83 1440.72 1130.30

EBITDA 6.94 1.51 0.79

PAT 3559.15 3564.69 1968.90

E/S Capital 553.67 553.67 369.18

KEY FINANCIAL RATIOS EBAY INDIA

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(PRE -ACQUISITION)

KEY FINANCIAL RATIOS MAR 2006 MAR 2005 MAR 2004

OF TATA STEEL PVT &
CORUS STEEL LTD
PVT (in Rs. Cr.)

PER SHARE RATIOS

Basic EPS (Rs.) 2.94 1.45 2.58

Diluted EPS (Rs.) 2.65 1.96 3.45

PROFITABILITY RATIOS

Net Profit Margin (%) 1.5 5.56 4.32

Return on Capital Employed (%) 1.89 3.85 2.56

Return on Assets (%) 13.45 5.81 3.12

LIQUIDITY RATIOS

Current Ratio (X) 1.52 1.45 1.65

Quick Ratio (X) -1.07 0.98 0.45

BASIC INFORMATION

Sales/Revenue 11569 12586 10985

Operating Exp. 10586 7568 8529

EBITDA 520 506 205

PAT 512 451.00 441.00

KEY FINANCIAL RATIOS OF

Flipkart(POSTACQUISITION)

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KEY FINANCIAL RATIOS MAR 2010 MAR 2009 MAR 2008
OF TATA STEEL PVT &
CORUS STEEL LTD
PVT (in Rs. Cr.)

PER SHARE RATIOS

Basic EPS (Rs.) 56.85 71.18 64.14

Diluted EPS (Rs.) 56.85 71.18 64.14

Cash EPS (Rs.) 69.08 84.50 75.56

Book Value [Share (Rs.) 418.85 331.59 298.70

P/E Ratio 10.50 2.97 10.38

PROFITABILITY RATIOS

Net Profit Margin (%) 20.23 21.36 23.84

Return on Net worth / Equity (%) 13.57 21.46 21.47

Return on Capital Employed (%) 7.83 8.99 9.94

Return on Assets (%) 6.78 7.58 8.50

LIQUIDITY RATIOS

Current Ratio (X) 1.23 0.96 4.64

Quick Ratio (X) 0.92 0.63 4.31

VALUATION RATIOS

Price/BV (X) 1.51 0.62 2.32

Earnings Yield 0.09 0.35 0.09

Enterprise Value (Cr.) 78147.05 45882.51 73683.19

Retention Ratios (%) 85.93 77.52 75.06

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BASIC INFORMATION

Revenue 26181.73 24951.39 20617.00

Operating Exp. 2419.89 2127.48 1654.96

EBITDA 7.70 4.69 8.20

PAT 5046.80 5201.74 4837.03

E/S Capital 887.41 730.79 730.78

INTERPRETATION
FLIPKART (Pre- Acquisition)
PARTICULARS 2004 2005 CHANGE
EBITDA 4.96 4.07 0.89
PAT 1968.90 3564.69 1595.75
Sales/ Revenue 10937.77 14717.56 3786.79
Current Ratio 0.72 0.77 0.05
Quick Ratio 0.50 0.42 -0.08

EBAY (pre- Acquisition)

PARTICULARS 2004 2005 CHANGE
EBITDA 663.00 707.00 44.00
PAT 441.00 451.00 10.00
Sales/ Revenue 8373.00 9155.00 782.00
Current Ratio 1.97 1.80 -0.17
Quick Ratio 0.05 0.01 -0.04

FLIPKART WITH EBAY (Pre & Post Acquisition)

PARTICULARS 2006 2008 CHANGE
EBITDA 5.20 8.20 3.00
PAT 3559.15 4837.03 1278.15
Sales/ Revenue 15437.44 20617.00 5179.56

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 Current Ratio 0.81 4.64 3.83
Quick Ratio 0.39 4.31 3.92

ANALYSIS OF FINANCIAL PERFORMANCE

FLIPKART AND EBAY increased by MORE THAN 6 CR the acquisition of course steel in the year
2008.

SYNERGIES FROM MERGER:

Flipkart and eBay have a large customer base, and the merger would enable
them to reach a wider audience. eBay, which exited the Indian market in 2018,
would gain access to Flipkart's vast customer base, while Flipkart would benefit
from eBay's global customer base.

Complementary strengths: Flipkart and eBay have complementary strengths in

terms of their product offerings and expertise. Flipkart is known for its focus on
fashion and mobiles, while eBay has a strong presence in electronics and
collectibles. By combining their strengths, the companies would be able to offer
a more diverse range of products to their customers.

Cross-selling opportunities: The merger would enable the companies to cross-

sell their products and services to each other's customers. For example, Flipkart
could offer eBay's global products to its customers in India, while eBay could
offer Flipkart's products to its global customer base.

CONCLUSION:

However, in 2018, eBay announced that it would be ending its strategic partnership with
Flipkart and would be selling its stake back to the company. Flipkart subsequently acquired
eBay's Indian operations and launched a new platform called eBay India Private Limited.

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 REFERENCES:

● https://encryptedtbn0.gstatic.com/images?q=tbn:ANd9GcTNrCQagyOEaiUIZlpOJvRhhzjeUbkl
PIN7rEysoDGeFTSqtnk8YflBsFdB1o_AiYoeejA&usqp=CAU)

● https://en.wikipedia.org/wiki/Tata_Steel_Europe

● https://blog.ipleaders.in/tata-acquired-corus-steel/

● https://blog.ipleaders.in/tata-acquired-corus-steel/#:~:text=Tata's%20 acquisition%20of
%20Corus%2C%20like,was%20worth%20in%20the%20 transaction.

● https://www.moneycontrol.com/financials/tatasteel/ratiosVI/TIS/3#TIS

● https://www.business-standard.com/article/companies/tata-corus-hugesynergies-in-medium-
term-106102000039_1.html

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