08 Mar 2017

Flipkart wants $1.5 billion to fight Amazon; but will it accept lower valuation?

Flipkart, India's leading e-commerce venture, is looking to raise another round of venture capital. This time, Flipkart is aiming for about $1.5 billion from variety of investors, reports Bloomberg. We learn that Flipkart is in talks with Microsoft, eBay and Tencent Holdings to raise funds that would help it sustain next four years. However, given current market conditions and trends, Flipkart will likely accept a lower valuation of about $10 billion. You may recall that Flipkart was valued at about $15 billion just a few months ago.

Recently published report on Mint revealed interesting statistics about the state of Indian consumer Internet businesses. The reported pointed out that Flipkart faced loss of Rs. 5769 crores against the revenues of Rs. 17,930 crores. Except for BookMyShow, almost every company featured in the report made losses. It looks like profits aren't the top priority for the top e-commerce rivals - Flipkart and Amazon. Both the companies are fighting for gross merchandise volumes (GMVs) by offering discounts to the consumers. Whether this strategy plays out well in favour of these companies, is something to be seen.

Flipkart-Funding-VC-15-Billion

Flipkart's newly appointed CEO, Kalyan Krishnamurthy says that funding isn't the number one priority for him. Krishnamurthy has recently had success with Flipkart dominating the festival season sales. He points out that on average, and Indian consumer would spend about $10 ( approximately Rs. 600 - Rs. 700 ) per online visit compared to $40 ( Rs. 2600 - Rs. 2700 ) in the United States. The company is therefore aiming to enter into online groceries market so that users purchase more frequently.

The rivals aren't behind either with it comes to having access to cash. Amazon's infused about $5 billion to capture Indian markets and with Alibaba's investment in PayTM, the competition just got more interesting. The investors of these e-commerce companies are betting on the market size that India offers.

Do you think Flipkart's right on the track with all its funding rounds? Do you think the VC funds can keep the e-commerce companies in the game? If yes, for how long?

Source: Bloomberg

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