Exclusive: Accel, Tiger look to exit Flipkart; Google announces changes to Android, Play Store in India

By Daisy On Jan 26, 2023

Happy 74th Republic Day!

Two early backers of Flipkart – venture fund Accel Partners and New York-based investment firm Tiger Global – are in talks to exit the ecommerce firm by selling their remaining stakes to its parent Walmart for around $1.5 billion, according to our sources.

Also in this letter:
■ Google makes several changes to Android and Play Store billing in India
■ Tech wants tax cuts, APA timelines in budget
■ New influencer rules will increase transparency but also raise costs: DigitalROI

Exclusive: Accel, Tiger Global in talks to exit Flipkart

Accel Partners and Tiger Global, two of Flipkart’s early backers, are in talks to sell their remaining stakes in the ecommerce company – which amount to about 5% of the firm — to its parent Walmart, multiple people aware of the development told us.

The American retail giant could pay around $1.5 billion for this share purchase, they added.

Details: While Accel owns a little over 1% of Flipkart, Tiger Global holds about 4% of the company. Once a deal is finalised, Walmart’s stake will increase from the current 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,” of the people said. “It is a significant moment for both Accel and Tiger Global.”

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

Walmart’s move to buy them out comes soon after its $1 billion investment in payments firm PhonePe through primary and secondary infusions.

Return on investment: For Accel, which first invested in Flipkart in 2009, the latest deal is expected to fetch returns of around $350 million. Starting with an initial $1 million, Accel over time invested about $100 million in total in the company. The venture fund had clocked returns of about $1 billion when it sold some of its stake during Walmart’s $16 billion acquisition of Flipkart in 2018.

Tiger Global’s exit from Flipkart will also deliver a 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.

Google makes several changes to Android and Play Store billing in India

On Wednesday evening, Google announced several key changes to the way it runs the Android operating system and the Google Play Store in India, to comply with two rulings by India’s antitrust watchdog.

The changes came a day ahead of the January 26 deadline put in place by the Supreme Court for Google to comply.

Changes: Google said it would introduce a licensing model for original equipment manufacturers (OEM), under which the device makers would be able to licence individual Google apps to pre-install on their devices.

The tech giant also said Indian users would in future have an option to choose their default search engine via a choice screen that will start to appear when a user sets up a new Android smartphone or tablet.

Yes, but: The company said it will “continue to respectfully appeal certain aspects of the CCI’s decisions and champion core principles of openness, expanding user choice, providing transparency and maintaining safety and security that have served the interests of the larger ecosystem”.

Catch up quick: On October 20, the Competition Commission of India (CCI) fined Google Rs 1,337.76 crore and asked it to make several changes to its Android market policies to prevent abuse of its dominant position.

A week later, the CCI fined Google another Rs 936.44 crore and asked it to make several changes to its Google Play Store Billing policies.

In December, Google approached the National Company Law Appellate Tribunal (NCLAT) against the Android order. But the NCLAT refused to grant it an interim stay.

In January, Google approached the Supreme Court, but it too denied the company interim relief, while extending the deadline for Google to comply to January 26.

Tech wants tax cuts, APA timelines in budget

IT and technology firms have asked the government to lower taxes, promote startups, and increase the ease of doing business in the upcoming budget. IT industry lobby group Nasscom has urged the government to prescribe timelines for closure of advance pricing agreements (APAs).

Demands: “The government should also notify safe harbour rules for entities with a turnover of up to Rs 1,000 crore and reduce the tax rate of the IT and IT-enabled Services industry to 15% from 17%-24%,” said Ashish Aggarwal, vice president and head of public policy, Nasscom.

The government should streamline APAs, Mutual Agreement Procedures (MAPs), regulations and benchmarking, added PN Sudarshan, partner and TMT industry leader, Deloitte.

The software companies’ association suggested that the government constitute an alternative dispute resolution body composed of members from revenue and industry, in place of a dispute resolution panel.

New influencer rules will increase transparency but also raise costs: DigitalROI

The new guidelines for social media influencers to regulate promotions could lead to higher costs for advertisers as they may need to spend more on creating compliant content, according to DigitalROI, a social media and influencer marketing company.

Catch up quick: Last week, the government announced endorsement guidelines for celebrities and social media influencers, mandating disclosure of benefits for promoting goods or services on social media.

“This includes not only benefits and incentives, but also monetary or other compensation, trips or hotel stays, media barters, coverage and awards, free products with or without conditions, discounts, gifts and any family or personal or employment relationship,” the Union Consumer Affairs Ministry said in a release.

Such disclosures must be prominently displayed with terms such as ‘advertisement’, ‘sponsored’ or ‘paid promotion’, it added. Failing to do so will attract a fine of up to Rs 50 lakh.

Quote: Vikas Mangla, founder of DigitalROI, said, “Consumers may become more aware of when an endorsement is sponsored, which could lead to increased scepticism about the authenticity of the endorsement. Advertisers may need to be more transparent in their relationships with influencers and other endorsers, which could lead to increased scrutiny of these relationships.”

It cost PhonePe Rs 8,000 crore to shift to India: CEO Sameer Nigam

New influencer rules will raise transparency & costs

PhonePe cofounder and CEO Sameer Nigam said on Wednesday that the company paid nearly Rs 8,000 crore in taxes to the Indian government to shift its domicile from Singapore to India.

Indian law poses challenges: Nigam said that about 20 unicorn startups and their investors have asked the company how it went about the process, saying they too are interested in moving their headquarters to India. PhonePe completed its shift from Singapore to India in October 2022.

In a YouTube Live session with PhonePe cofounder and chief technology officer Rahul Chari, Nigam said Indian law poses many challenges for startups that want to shift to India, such as a capital gains tax on shareholders and investors, reset of the vesting period for employee stock options (Esops), and the inability to offset losses.

“Our investors paid almost Rs 8,000 crore in taxes just to allow us to come back to India,” Nigam said.

We reported on January 4 that the government is likely to gain as much as $1 billion in taxes from US-based retailing giant Walmart and other shareholders of PhonePe as part of its shift to India.