Flipkart Closes Rs 4500-Cr Fund Round In Big Ecommerce Race

Flipkart has closed a funding round of $700 million (Rs 4,500 crore) at a valuation of $15 billion, scooping up capital for the first time this year as the battle for dominance in the Indian online retail market heats up.

Existing investors including Steadview Capital participated in the latest fundraise, said two people aware of the development. Flipkart co-founders Sachin Bansal’s and Binny Bansal’s holdings of about 8.5 % each in India’s most valuable online marketplace are now worth more than $1 billion.

Flipkart declined to comment on the fundraising.

Its latest fundraise couldn’t have come soon enough. Last week, ET reported that e-commerce giant Amazon was readying a $5-billion war chest to grow India into its largest market outside the US.

Flipkart has been in negotiations with New York-based hedge fund Tiger Global and other investors since early this year for another mammoth round of capital-raising of at least $1 billion, ET reported in February.

With Snapdeal and Paytm also gaining rapidly and threatening to grab a larger share, Flipkart has been paying top dollar to hire talent from Silicon Valley, scale up logistics and delivery engine, as well as venture into new businesses such as advertising.

The 8-year-old firm has raised about $3.4 billion from global investors keen on India’s growing consumption and a rising young middle class more comfortable than ever with shopping online. In December, Flipkart secured $700 million at a valuation of about $11 billion only six months after it had raised $1 billion, making 2014 a record year for it.

The billion user prize
Global online retail giants including Amazon as well as investors view India as the last ‘billion user’ market. “India is a legitimate market for e-commerce and it has become a battle where staying power will matter,” Ashish Gupta, senior managing partner at Helion Venture Capital, an investor in ShopClues and BigBasket, told ET in an email.

By 2020, India’s internet market is expected to grow to $137 billion from $11 billion in 2013, according to Morgan Stanley. Amazon, which last year committed $2 billion for its India operations, has been surprised by the express growth of India’s online retail market. The company’s chief financial officer Brian Olsavsky in a recent second-quarter earnings call said, “When we see a positive surprise we double-down on it — that’s kind of our policy — and India is that kind of surprise.”

Amazon India reached 23.6 million unique visitors in May, edging past Flipkart’s 23.5 million unique visitors, according to data from internet analytics firm com-Score. Snapdeal had 17.9 million unique visitors that month.

To overcome the challenge, Flipkart is adding high-margin categories such as furniture, homes and travel booking, which it expects will boost its annual sales in terms of retail price (gross merchandise value, or GMV) to $10-12 billion in 9 months to a year, more than double the $4 billion it achieved in 2014-15.

India’s $600 billion retail market is also coveted by Chinese e-commerce giant Alibaba, which is in advanced talks to increase its stake in Delhi-based Paytm to 40% by investing an additional $600 million in it. Alibaba founder Jack Ma has visited India several times after its blockbuster initial public offering in the United States last year and has put in place a team to focus on making strategic bets in the country.