Thursday, 11 July 2013

Flipkart set to mop up record $300 million

BANGALORE: Online retailer Flipkart has lined up funding worth about $300 million, which will take the loss-making e-commerce poster boy through to an initial public offering (IPO), possibly in the next 24 months, people directly briefed on the matter said.

 Flipkart on Wednesday announced that it had secured $200 million from existing investors, including US hedge fund Tiger Global, South Africa's Naspers and venture capitalist Accel Partners.

The Bangalore-based company is also on course to mop up another tranche of $100 million from new investors even as the latest fund-raising valued the e-tailer at $1.5 billion, sources said. Tiger and Naspers have poured in almost $170 million, taking their combined stake in Flipkart to over 50%. Accel, which seeded the start-up, and San Francisco-based family office Iconiq Capital have brought in the remaining $30 million. Flipkart is sitting on offers from middle-east sovereign investors and global pension funds to raise the additional $100 million. With this, Flipkart would have raised almost half a billion dollars, probably the biggest funding received for an Indian start-up venture till date.

While unveiling the $200 million round, Sachin Bansal, co-founder and CEO of Flipkart, said the investment was a big validation of the e-tailer's model and the Indian e-commerce growth story. "There have been skeptics about Flipkart and Indian e-commerce. Today's development should put to rest these arguments," he said. He declined to comment on speculation regarding additional funding, enterprise valuation and the likely timing of an IPO.

The latest Flipkart funding is one more indication of the interest that Indian technology and e-commerce start-ups are receiving globally. Japan's telecom and internet company SoftBank invested $200 million in Bangalore-based ad network Inmobi in 2011. Last month, Naspers bought redBus for an estimated $110 million. A consortium led by General Atlantic invested $108 million in analytics services firm Mu Sigma in 2011.

Bansal said the annualized run rate of the gross merchandize value (or total value of transactions) on Flipkart was over $500 million, and the company was on target to hit the $1 billion mark by 2015, a milestone eyed for the overseas public listing.

Asked about the company's losses, Bansal said the firm was not profitable only because of the massive investments it was still making. "We can be profitable if we stop investing. But we want to be market leaders in a number of categories, and the market is almost doubling every year. So, it's a strategic decision to invest. Binny (Binny Bansal, the other co-founder) and I are thinking very, very long term," he said.

Bansal further said the fresh funding would be used for investments in technology, improving the supply chain, and developing talent. "One day last month, we shipped 1.3 lakh items. That's 1.5 items a second, or, if you look only at daytime, about 4-5 items a second. In a few years, this will become several million shipments a day. The only way to handle that kind of volume is through automation, and that will require a lot of investment," he said.

The company, which started by selling books online, is now into numerous categories, including electronics, apparel, watches, cameras, footwear, beauty & personal care and baby care. It has 96 lakh registered users, up from 2.5 lakh just two-and-a-half-years ago.

Source: The Times of India

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