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The first move of consolidation in the e-commerce space in the country has created waves all over.

Reacting to earlier reports put out by Entrepreneur magazine, Flipkart.com has issued a statement saying ‘India’s largest e-commerce player in physical products has acquired LetsBuy, the second largest retailer in electronics.

This deal will allow for a faster rate of expansion for both companies giving the combined entity a much larger share in the consumer electronics market.

The acquisition is a combination of cash and equity. Speaking about the acquisition, Sachin Bansal, CEO and Co-Founder, Flipkart, said, “This acquisition fits into our strategy of building dominant shares in all categories we operate in. We are already leaders in the books and media verticals. Given that we managed to build a leadership position in consumer electronics as well since its launch in early 2011, it made sense for us to consolidate when we saw this opportunity. This acquisition opportunity came at a very attractive price for us and the timing has also been ideal. The synergies will now allow us to accelerate faster and get to a share similar to what we enjoy in the online books category”.

Hitesh Dhingra, CEO and co-founder, Letsbuy.com, said, “Letsbuy.com has experienced a phenomenal growth in the last one year and holds a dominant position in the e-commerce industry in India. We believe that our expertise in the 3Cs category matched with Flipkart’s superior technology and supply chain could be a killer combination. As a company, we had a choice to raise a large round of funding as well; however, aligning our business with the largest player in the market made sense as the resultant synergies will guarantee our customers the best possible service, price and selection. ”

A hesitant move?

Earlier in the day, Dhingra had said reports of Flipkart.com acquiring his company are false and a “rumor”.

“I do not know where this report has come from. We have been talking to various investors for the past couple of months but nothing has been firmed up yet. The acquisition by Flipkart.com is only a rumor. This can really hurt the sentiments of our employees and the company itself,” he had stated.

LetsBuy.com was founded by Dhingra with Amanpreet Bajaj (COO and Co-Founder) in 2009. An online retailer of consumer electronics, communications and computer goods from the leading brands in the categories, the company enjoys a national footprint today. Manish Vij, Co-Founder, Vun Network, and Nitin Gupta (Former Country Manager, South Asia at MasterCard and Former President and COO at Rediff.com) are known to have made angel investments in the portal. The e-commerce retailer raised $6 million in venture capital funding from Helion Venture Partners, Accel Partners and Tiger Global in January 2011.

According to the deal, the founders of LetsBuy along with their 350+ team will continue to function independently, with the added advantage of now being able to access Flipkart’s technology platform and supply chain capabilities. Dhingra had earlier discounted the prospect of leaving the company and selling it.

Flipkart has been very aggressive since late last year. It snapped up the assets of Chakpak.com on the one hand and built an online music store, acquired book recommendation engine WeRead and digital music firm Mallers, Inc. on the other.

While the finer details on mutual synergies are being worked out by both teams at present, the move has been welcomed by the investors of both firms. Helion Venture Partners, the lead investor in LetsBuy.com has said it believes that the combined strength of the two leading players is formidable and will be able to deliver a stronger value proposition to customers.

Tags:
acquisition, E-Commerce, Flipkart.com, Hitesh Dhingra, LetsBuy.com, Sachin Bansal