Flipkart is buying eBay India as competition from Amazon heats up

India’s giant ecommerce company Flipkart is stepping up its efforts as competition from Amazon heats up in the nation.

Flipkart announced Monday it has signed an agreement to acquire eBay India.

As part of the deal, eBay will make a cash investment in Flipkart and hand over its India business to the Bangalore-based company. Neither of the companies shared how much cash investment eBay is making, but Reuters says it’s $500 million.

The announcement comes as part of latest round of funding for Flipkart, which saw global giants Tencent, Microsoft and eBay invest $1.4 billion in the company at a valuation of $11.6 billion, it said today.

Company founders Sachin Bansal and Binny Bansal touted the move as a "landmark deal" for the company and for India. "This deal reaffirms our resolve to hasten the transformation of commerce in India through technology," they said in a press statement.

Ebay India and Flipkart believe the convergence of their businesses will offer customers "access to the wide array of global inventory on eBay, while eBay’s customers will have access to more unique Indian inventory provided by Flipkart sellers."

"Ebay is committed to winning in India in partnership with Flipkart. Our exclusive global trade partnership will allow eBay and Flipkart to reach even more consumers around the world," Devin Wenig, President and CEO of eBay, said in a press statement.

Analysts praised the move. Sandy Shen, Research Director, Gartner said the latest round of investment will help Flipkart keep "competition especially Amazon at bay." He added Microsoft, Tencent, and Ebay will provide India's ecommerce giant the "technology and market expertise" that it earnestly needs.

"Flipkart has been and will continue to make acquisitions to increase scale, and the next challenge is to strategize the path to a sustainable business model within a set time frame. Hopefully with the funding and expertise it is getting from the investors, it will be able to establish itself as a true market leader from both the technology and operational perspectives," Shen added in a statement.

Ebay forayed into the Indian market in 2004. Interestingly, the company had also made an investment in Flipkart-rival Snapdeal four years ago (and sold it two years ago). Snapdeal itself is reportedly in talks with Flipkart for a potential acquisition.

Founders of Snapdeal, which lost the No. 2 spot to Amazon in India’s ecommerce businesses race last year, assured the employees that their future is in good shape.

The move comes a year after Amazon CEO Jeff Bezos announced an investment of an additional $3 billion in India, calling the country the company's fastest growing market.