Despite Flipkart having cash reserves of $4 billion on its balance sheet, its wholesale cash and carry arm Flipkart India has taken loan of Rs 1,000 crore from Axis Bank, documents filed with the Registrar of Companies (RoC) showed.
Despite Flipkart having cash reserves of $4 billion on its balance sheet, its wholesale cash and carry arm Flipkart India has taken loan of Rs 1,000 crore from Axis Bank, documents filed with the Registrar of Companies (RoC) showed. According to the RoC filing, Axis Bank has sanctioned the loan after Flipkart India hypothecated its finished goods, stock in trade, cash and other current assets lying or in possession with the company. Though it hypothecated its current assets, the loan agreement with Axis allows Flipkart India to sell all or any of the goods hypothecated.
The development comes at a time when Flipkart is all set to roll out its biggest annual discount sale starting from September 20-24. The dates of the ‘Big Billion day’ will clash with Amazon’s ‘Great Indian Sale’. Both the e-commerce titans have announced big offers and discounts to lure online buyers. The loan agreement also provides that Flipkart India will have to maintain a margin of security with the bank, and on the margin falling below sufficient value, the company will have to make up the deficiency within 30 days.
The upcoming festival weeks are important because e-tailers in India get their largest chunk of revenue from the period that starts with dussehra and continues till the New Year. According to a RedSeer report, the September 2017 e-tailing sale days are expected to generate gross GMV (gross merchandise value) of up to Rs 10,000 crore ($1.7 billion). Flipkart, which was finding it difficult to raise capital, recently mopped up $1.5 billion from Tencent, Microsoft and eBay. Additionally, in August, it had raised $2.5 billion (a mix of primary and secondary capital) from Softbank’s vision fund, making the Japanese internet major one of the largest shareholders in Flipkart.