Flipkart raises a billion dollars, may be worth $7 billion

Armed with $1 billion (about ₹6,000 crore) of fresh funding from a bevy of investors old and new, India’s largest e-commerce company is well positioned to fend off challenges from all comers, particularly American rival Amazon.

The latest round of funding, the largest such infusion in the Indian e-commerce space, saw existing investors Tiger Global Management and South Africa’s Naspers pour in more money along with GIC, a Singapore sovereign wealth fund.

Other investors include DST Global, ICONIQ Capital, Morgan Stanley and Sofina. Flipkart’s market valuation is now expected to be in the range of $5-7 billion, double that of Mukesh Ambani’s Reliance Retail.

“Flipkart has changed the way people shop in India. This funding further strengthens our capabilities to deliver on our next stage of growth,” said Binny Bansal, Flipkart co-founder and COO, in a statement.

With this, the company has raised a total of $1.7 billion since it was founded in 2007.

“This investment will help Flipkart to combat Amazon’s aggressive plans and will not make them look over their shoulder,” said Naganand Doraiswamy, President of TiE Bangalore.

Expansion mode Flipkart, whose other rivals include Snapdeal and eBay, plans to use the money to build a stronger brand and expand its online payments and logistics businesses.

The company, which commands 65 per cent of the online retail market, has also been broadbasing its presence. In May, Flipkart bought online fashion retailer Myntra for an estimated $330 million, widening its user base and product portfolio and increasing the latter's spending power. It has also launched its own brand of electronics items, including a tablet.

Profitability question However, questions remain about the profitability of its e-commerce business. Flipkart acknowledges that it is on the path to profitability but does not share numbers. It points to the 22 million registered users and five million shipments it handles every month as proof of its business growth. “Now, 50 per cent of revenues come from mobile devices, compared to 5 per cent last year,” said Binny Bansal.

Industry watchers estimate that by 2020, India will have 500 million new Internet users, including mobile users, from 200 million or so now. Addressing a press conference, co-founder Sachin Bansal said: “We are at an inflection point with regard to Internet use in India.”

Arch rival Amazon recently announced the launch of five new warehouses across India to cater to the growing demand.

TiE’s Doraiswamy said the company will be able to invest in its own brand of electronics as users are getting more comfortable buying online. “It will also look to strengthen its supply chain and payments side, as Amazon has laid out aggressive plans in India,” he added.

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