Flipkart, the home-grown e-commerce major, is in the final stages of raising its latest round of funding in the range of $800 million to $1 billion from both existing and new set of investors but this is likely to come at a lower valuation of $7-8 billion. The e-tailer had last raised funds in July, 2015, to the tune of $700 million at a valuation of $15.2 billion but since then the situation has witnessed a dramatic change for both the company and industry.
Sources told FE that the latest fund raise, which is likely to close in the next 4-6 weeks, will come in at the lowered valuation taking into account the current business environment with the sector not being in hyper growth mode.
Flipkart would require this much needed fund to stave off fierce competition from its rivals like Amazon and the latest entrant Alibaba. Amazon has already committed $5 billion of investment in the Indian market. Flipkart has also plans to go deeper into the Indian market via tier 2 & 3 locations which would require higher investments.
Flipkart has till now cumulatively raised $3.15 billion with key investors being Tiger Global, DST Global, Nasper, Steadview Capital and Accel Partners. It reported combined losses of R2,851 crore on a revenue of R15,129 crore for FY16.
It is understood that some of the new investors in the company would be the global software product giant – Microsoft, US based e-commerce player – eBay and Chinese internet major – Tencent.
Flipkart recently got into cloud partnership deal with Microsoft which was seen as a major win for the software product giant. On other hand, eBay could not independently make much of a headway in the Indian market and would like to get certain piece of action through Flipkart. In the case of Tencent, its Chinese rival Alibaba has made its foray into the Indian e-commerce market through its investee company Paytm.
Flipkart has been looking to raise additional round of funding for quite sometime now but it had been stuck on valuation grounds. The $15.2 billion valuation enjoyed by Flipkart in the past did not cut much ice with the investors as the overall e-commerce market in India had slowed down in 2016 and the company was also faced with stiff competition from the global e-commerce player – Amazon.
When contacted, a spokesperson for Flipkart said, “As a company policy, we do not comment on market speculations”. A spokesperson for eBay too said the same and a Microsoft spokesperson said, “We have no plans to share in this regard.” E-mail sent to Tencent remained unanswered.
According to RedSeer Consulting, the Indian e-commerce industry which grew by 180% in 2015 crashed to mere 12% in 2016 and it also expects that 2017 will be a defining year for the sector that will differentiate the best from the rest.
Flipkart has already witnessed deep management changes with Kalyan Krishnamurthy representing investor Tiger Global taking over as CEO of the company’s e-commerce business with both the founders – Sachin Bansal and Binny taking on larger roles.
Under the leadership of Krishnamurthy, Flipkart has clawed back its pre-eminent position with market estimates that it had beaten Amazon during the Big Billion Day sale in November last year. It has managed to get into exclusive partnerships with mobile phone manufacturers which are the largest selling items in the marketplace.