Flipkart Eyes INR 700 Crore Stake Sale in Shadowfax Technologies Ahead of IPO
Flipkart eyes selling shares in logistics provider Shadowfax Technologies worth INR 700-750 crore, cutting its shareholding ahead of the company’s upcoming IPO. Walmart-backed e-commerce giant likely to hold 2% stake to comply with SEBI’s promoter lock-in regulations.
In a move valued at INR 700-750 crore, Walmart-backed e-commerce juggernaut Flipkart has initiated the process of selling a portion of its interest in logistics startup Shadowfax Technologies. Flipkart has diluted its share in the logistics company Shadowfax for the second time with this stake sale.
In addition, this is the most recent in a string of monetisation initiatives that have brought in more than INR 2,500 crore (about $265 million) for the Walmart-owned e-commerce behemoth from sales of shares in BlackBuck and other investments. As it avoids external financing and delays its IPO aspirations, the company has relied more and more on portfolio sales to release capital after cutting its monthly cash burn from $40 million a few months ago.
How Flipkart Planned to Execute the Sale?
It is anticipated that Flipkart will sell its shares valued at INR 700-750 crore in the next weeks as part of a bigger block deal in which other early investors are also likely to take part. Among Shadowfax's initial funders were Mirae, Eight Roads, Qualcomm, and TPG NewQuest. Note that Flipkart cannot sell its entire investment in Shadowfax.
Flipkart is expected to sell approximately 33.7 million shares, reducing its position by approximately 6%, from its existing 42.6 million shares, which represents an 8% interest. This would result in liquidity of INR 700-750 crore. The proposed acquisition would give Flipkart a 2% stake in Shadowfax. After the six-month lock-in expiry concludes at the end of July, there will be no more shares available for sale than the 33.7 million that Flipkart intends to sell. The remaining 8.9 million shares of Shadowfax must be retained by Flipkart since they constitute the minimum promoter commitment. The securities and exchange board of India (SEBI) mandates that promoters retain a minimum ownership following an initial public offering (IPO) to guarantee they have "skin in the game" for the long run.
It also gives public investors peace of mind that important stockholders can't leave right after the company is listed. These shares cannot be sold during the required lock-in period, which is usually 18 months. In cases when the number of shares needed is not met by the promoters themselves, eligible current shareholders can donate a portion of their holdings without really becoming promoters.
Financial Dynamics of Shadowfax and Flipkart
Shadowfax is a logistics business that Flipkart has supported in many fundraising rounds since its 2019 debut. In addition to being the principal delivery partner for a number of businesses that depend totally on third-party logistics, Shadowfax is now one of the most important last-mile delivery partners for Flipkart. It manages hyperlocal and e-commerce shipments, especially during times of high demand when the company's captive logistics network is overburdened.
Prior to its public market listing, Shadowfax submitted an updated draft red herring prospectus (UDRHP) to the capital markets regulator, which revealed that Flipkart owned around 14% of the firm, or approximately 74.9 million shares. As part of the offer-for-sale (OFS) component of the IPO, Bengaluru-based Flipkart sold some shares, reducing its holding in Shadowfax to approximately 8%. According to regulatory filings, therefore, approximately 42.6 million shares are retained.
