Raises $3.6 billion to take on new rivals; funding round saw return of SoftBank to its cap table
At a time when big corporates like Reliance Industries and Tata Group are expanding their footprint by foraying into online play, e-commerce major Flipkart has raised a huge $3.6 billion in a fresh round of funding from a clutch of investors led by GIC, Canada Pension Plan Investment Board, SoftBank Vision Fund 2 and Walmart to take on the emerging competition.
The new round of funding was also backed by sovereign funds DisruptAD, Qatar Investment Authority, Khazanah Nasional Berhad and marquee investors Tencent, Willoughby Capital, Antara Capital, Franklin Templeton and Tiger Global, the company said in a statement on Monday.
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Post this fund-raise, Flipkart has been valued at $37.6 billion. It was valued at $24.9 billion when it had secured $1.2 billion in internal funding led by Walmart in July last year.
This is the first time Flipkart has raised capital from external investors post its acquisition by Walmart in 2018.
The investment also marks the return of SoftBank to Flipkart’s cap table. SoftBank had sold its stake in the company to Walmart in 2018 when the US-based retailer acquired a majority stake in the start-up in a $16-billion deal. Walmart’s stake after this funding round is expected to be around 74%.
Flipkart said that the fresh capital will be used to fund the growth of new product categories, strengthen its infrastructure and supply chain besides building on its technological capabilities. The funding will also support the firm’s efforts to bring more small and medium businesses into the digital fold.
“As we serve our consumers, we will focus on accelerating growth for millions of small and medium Indian businesses, including kiranas. We will continue to invest in new categories and leverage made-in-India technology to transform consumer experiences and develop a world-class supply chain,” Kalyan Krishnamurthy, chief executive officer, Flipkart Group, said.
The firm said that one of its key focus areas is to help informal commerce segments leverage the power of technology. “As one of the leaders in the fashion segment, this means working with the fashion industry and helping small businesses explore untapped opportunities that technology presents,” the company said.
“The quality of the investor group and valuation announced today (Monday) is further confirmation of global confidence in Flipkart and its mission to transform commerce in India,” Judith McKenna, president & CEO, Walmart International, said.
“From our platform as one of the largest Asian e-commerce investors, SoftBank has a broad lens on the fundamental trends shaping digital commerce in the region. The opportunity to meet consumer demand for high-quality selection at low prices and a young population make online consumption critical to India’s quest for the ‘$5-trillion economy’ that Flipkart’s growth story has been enabling,” Lydia Jett, partner, SoftBank Investment Advisers, said in a statement.
The country’s e-commerce market which for many years was a two player market led by Flipkart and Amazon has since the outbreak of pandemic last year seen consumers moving in large numbers to online shopping leading conglomerates like RIL and Tata Group to also venture into this space. The funding, therefore, will help Flipkart fight such rivals. Flipkart is also reportedly weighing a US IPO (initial public offering) as early as next year.
Flipkart claims to have more than 350 million registered users. Also, more than 300,000 registered sellers from across the country are on its marketplace with 60% of them coming from tier 2 cities and beyond. The investment also comes at a time when India is mooting stricter e-commerce norms which have the potential to increase compliance burden, resulting in more business costs.
Analysts at Goldman Sachs estimate Indian e-commerce market to reach $112 billion in GMV (gross merchandise value) by FY25, growing at a 29% CAGR over FY20-25.