Walmart is leading a $1.2bn funding round into its Indian ecommerce service Flipkart as it faces challenges from the coronavirus pandemic and the entrance of rival platform JioMart.

Flipkart said the funding would be used to “support continued development of its ecommerce marketplace as India emerges from the Covid-19 crisis”.

Walmart bought almost 80 per cent of Flipkart for $16bn in 2018, pitting itself against US retail giant Amazon in one of the world’s most promising growth markets for online shopping. The latest deal values Flipkart at $25bn post-money.

Both Amazon and Flipkart were hit by the strict lockdown that India imposed in March, even temporarily suspending services as non-essential deliveries were banned.

The two companies, which have accounted for the bulk of India’s online grocery market to date, now also face a formidable new rival in JioMart, owned by Mukesh Ambani’s conglomerate Reliance Industries.

Reliance has paired its grocery-focused platform with Facebook’s ubiquitous messaging service WhatsApp, after the US social media giant took a $5.7bn stake in Reliance’s digital business Jio in April. Reliance also runs India’s largest brick-and-mortar retail operation.

Flipkart said it was “rapidly accelerating share” in categories including groceries, which analysts expect to be one of the fastest growth areas, as well as building its offerings for small businesses and investing in local-language services to broaden its reach.

Flipkart is enabling “millions of customers, sellers, merchants and small businesses to prosper and be a part of India’s digital transformation,” said Judith McKenna, Walmart International’s chief executive. The management has “a clear vision and [is] relentlessly focused on giving Indians frictionless choice in how they shop and sell online”.

The new funds come as US and other international investors look to bolster their presence in India, with recent tensions leading to restrictions on Chinese investment in India.

Reliance has raised more than $15bn in recent months from a dozen investors including Facebook, KKR and Saudi Arabia’s Public Investment Fund. Google said this week it planned to invest $10bn in India in the coming years. Amazon early this year said it would invest $1bn in the country.