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Is Flipkart Raising Another Funding Round at $10B Valuation?

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The market is abuzz with rumours that India’s largest online retailer, Flipkart, could well be on its way to begin with a third round of mega fundraising this year, valuing the e-commerce retailer at nearly $10 billion. This round is expected to begin early next year, in January.

The Indian e-retailing giant is already in the top league of privately held internet ventures across the globe, placed with the likes of Dropbox, smartphone app Uber, Airbnb, etc.

Earlier in the year, the online retailing giant had raised $210 million at a valuation of $ 3 billion which was later followed by raising $1 billion at the valuation of $7 billion. After its second round of fund raising, the unlisted company owned by Sachin and Binny Bansal had been valued at $7 billion.

Flipkart-Funding

Funds Raised By Flipkart Till Date – USD 1751 Million

Round Who Funded Date Amount
First Round Accel India 2009 USD 1 Million
Second Round Tiger Global 2010 USD 10 Million
Third Round Tiger Global June 2011 USD 20 Million
Fourth Round Naspers / ICONIQ Capital August 2012 USD 150 Million
Fifth Round Naspers, Accel Partners, Tiger Global, and ICONIQ Capital July 2013 USD 200 Million
Sixth Round Dragoneer Investment Group, Morgan Stanley Investment Management, Sofina and Vulcan Capital, Tiger Global Oct 2013 USD 160 Million
Seventh Round DST Global May 2014 USD 210 Million
Eighth Round Tiger Global, DST Global, Accel Partners (plus other new investors) July 2014 USD 1000 Million
Total USD 1751 Million

 

This proposed move by Flipkart is being seen in the business circles as a part of its efforts to take on its rival e-retailers, who have also upped their ante in the last few months.

The exact amount which the Indian online retailer plans to raise in this round is not yet clear (the market buzz says it could be $1- 1.5 billion). Nor is there any information to suggest who the investors will be. Inside sources suggest that a part of its fresh funds could come from existing investors which include venture-capital firm Accel Partners, billionaire Yuri Milner owned DST Global, tech investment firm Tiger Global Management, Singapore’s sovereign wealth fund, Sofina GIC, Morgan Stanley Investment Management and ICONIQ Capital.

Though some of the existing investors may not participate in the fresh round of funding none of them are expected to sell their stake.

Economic Times, however, said that the e-retailer which began with selling books online from a garage in Bengaluru, is being extremely picky about whom they want on board.

“Talks haven’t begun yet and Flipkart is looking to target only a few investors that they want on board,” said one of the two persons directly involved in the process.

Tiger Global, whose investment in Flipkart is o the tune of $700 million already, could well invest another $300 million, surpassing its investing in the giant social networking site Facebook.

There has been no confirmation about these rumours, as the spokeswoman representing both Flipkart and Tiger Global declined to comment on the matter.

At present, a large part of the company’s funds go down the drain in the form of discounts and on its promotional strategies, said a source close to the company. The amount thus spent was put at Rs 70 crore every month.

[Interesting Read: Flipkart Vs Amazon Vs Snapdeal: Revenues & Losses Comparison]

The e-retailer has, of late, been trying to identify the sectors and areas in which it needs to invest more heavily than others before it can double in size before the end of the next year.

They have chosen to do so in sectors where they already hold an edge, like fashion (where they are the market leaders after the Myntra acquisition). They plan to foray into packaged food and furniture soon too besides expanding its range of products in the lifestyle and consumer durables section.

The Indian e-commerce scene is bustling with activity at the moment. With internet penetration improving with every passing day and the tariffs of surfing coming down, more and more people are shopping online through their computers, tablet devices and smartphones.

With cheaper smartphones from companies like Micromax and Chinese made Xiaomi flooding the market and cheaper mobile internet services, online spending in India is expected to increase manifold in the coming years.

The three forerunners who account for almost half of India’s online sales at present are:

  1. Flipkart,
  2. Amazon, and
  3. Snapdeal.

Amazon, the global e-retailer, which appeared on the Indian scene only last year, is already placed second and is giving sleepless nights to our very own e-commerce leader.

The Amazon founder cum owner Jeff Bezos had, on his recent visit to India, mentioned about his company’s plans to invest $ 2 billion in the year 2015. Though question marks had been raised about the ability of the world’s leading retailer to continue its operations in India after an Indian minister made it clear that it will not allow e-commerce players to make backdoor entry into FDI and Amazon’s recent tax tussles with the Karnataka state government, the company had later confirmed that it has no plans to discontinue its operations or withdraw from here immediately.

Rival Snapdeal had also raised $627 million only last month from its Japanese investor Softbank.

“There are aggressive existing competitors and large offline players could come in very soon. It makes sense to extend its leadership now,” said Arvind Singhal, chairman of retail advisory Technopak.

It is now clear beyond doubt that Flipkart’s promoters want to make it as popular in India as Alibaba is in China. The Jack Ma owned company which went public in September is now valued at $280 billion roughly.

Will Flipkart be able to match and the investors’ expectations and reach those dizzying heights?

Depends on how they make their choices in the coming months and how well they play their cards.

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