That gives them 1/5 of India's entire ecommerce business (if the figures in the article about percentage of retail are accurate) which is not inconsiderable.
On the other hand, since the gross margins on those sales won't be large, it also suggests that the volume of ecommerce carried out in India will have to grow by an order of magnitude (even if Flipkart can grow that large market share) if Flipkart is to earn a return on that huge investment. Bearing in mind the Indian middle class has been internet savvy for a while that's asking for a lot unless the investors are very patient.
Investors can afford to be "patient" because they don't have to wait for that money to come back as profit. They make money if they sell FK for more than the price they paid. This is not always a good thing, but it does allow investors to take into account long term value when investing.
Sure, but there are not many people or investment funds willing to buyout $1 billion worth of equity in an Indian company, particularly not a pre-profit one whose assets are largely digital. Silicon Valley accounting doesn't apply, and a lot of restrictions on foreign investors do.
If your fund needs to achieve the largest IPO in a country's history to achieve an acceptable ROI, your limited partners had better be patient, or your growth trajectory spectacular.
In this case, since they apparently already own a huge percentage of the market, its a spectacular growth trajectory that involves getting Indians to buy a lot more online... which given that Indians with disposal income have had internet access for a while now might not be straightforward.
India is a rapid growth market. Amazon is worth $150 billion If FK can win that market in India and potentially expand to China as disposable income in the area grows, then these investors will see a large return.
At $1 billion this seems like a big gamble, but it does not seem like a naive or short sighted one.
On the other hand, since the gross margins on those sales won't be large, it also suggests that the volume of ecommerce carried out in India will have to grow by an order of magnitude (even if Flipkart can grow that large market share) if Flipkart is to earn a return on that huge investment. Bearing in mind the Indian middle class has been internet savvy for a while that's asking for a lot unless the investors are very patient.