Flipkart plans to sell stake in Shadowfax Technologies

Walmart-backed e-commerce major Flipkart has reportedly initiated the sale of a portion of its stake in logistics startup Shadowfax Technologies, valued at approximately Rs 700-750 crore.

The proposed transaction marks Flipkart's second stake dilution in Shadowfax and is the latest in a series of portfolio monetisation efforts that have generated more than Rs 2,500 crore (around $265 million) through exits from investments including BlackBuck, Aditya Birla Group companies and other holdings. The stake sales come as Flipkart continues to reduce its cash burn from nearly $40 million per month a few months ago and focuses on unlocking liquidity through portfolio exits while avoiding external fundraising and pushing back its IPO plans.

“Flipkart may sell shares as early as the end of this month around when the six-month lock-in expiry ends as part of a larger block deal,” a person familiar with the development said. The deal may be executed at a discount of 2-4% from current market price (CMP), a second source said.

Flipkart first invested in Shadowfax in 2019 and has continued to back the company through subsequent funding rounds. Over the years, Shadowfax has emerged as one of Flipkart's key last-mile logistics partners, managing hyperlocal and e-commerce deliveries, particularly during peak shopping seasons when Flipkart's in-house logistics network faces capacity constraints. The company also serves as the primary logistics partner for several businesses that rely entirely on third-party delivery services.

According to Shadowfax's updated draft red herring prospectus (UDRHP), Flipkart owned around 14% of the company, or nearly 74.9 million shares, before the IPO. As part of the offer-for-sale (OFS), Flipkart reduced its stake to about 8%, retaining approximately 42.6 million shares, regulatory filings show.

The partial exit through the IPO generated around Rs 400 crore for Flipkart, delivering a return of more than two times on its estimated investment of Rs 140 crore. The company now stands to realise an additional Rs 700-750 crore through the proposed block deal.

Sources said Flipkart is likely to sell around 33.7 million shares, equivalent to roughly 6% of Shadowfax's equity, while retaining a residual stake of about 2% if the transaction is completed. Other early investors, including Mirae, Eight Roads, Qualcomm and TPG NewQuest, are also expected to participate in the block deal over the coming weeks.

However, Flipkart will not be able to exit its entire holding immediately. Of its remaining 42.6 million shares, only 33.7 million will become eligible for sale after the six-month lock-in expires at the end of July.

The balance 8.9 million shares are classified as part of the minimum promoter contribution and remain subject to a longer mandatory lock-in period of around 18 months under Securities and Exchange Board of India (SEBI) regulations.

Minimum promoter contribution is the minimum stake that the securities and exchange board of India (SEBI) requires to remain locked in after an IPO to ensure there is long-term 'skin in the game' and reassure public investors that key shareholders cannot exit immediately after listing.

SEBI's minimum promoter contribution requirement is designed to ensure that key shareholders maintain a long-term commitment to the company after its public listing, providing confidence to public investors that significant stakeholders cannot immediately exit. Where promoters do not hold sufficient shares to meet this requirement, eligible existing shareholders may contribute part of their holdings without being designated as promoters. In Shadowfax's case, Flipkart, along with Mirae, Eight Roads and TPG NewQuest, fulfilled this requirement, according to regulatory filings.