With $160 mn fresh funding, Flipkart’s $1.5-bn valuation comparable to P&G India, Tata Global Beverages

10 Oct,2013

By A Correspondent


Continuing its capital-raising successes, online retailer Flipkart.com has mopped up a further $160 million ( Rs 976 crore) from mostly new investors, taking the total in the fifth round to $360 million ( Rs 2,196 crore).


The latest funding values Flipkart, considered the Amazon of India, at over $1.6 billion, or Rs 9,760 crore. This is similar to its valuation in July, when it raised $200 million. Incidentally, Flipkart is worth more than the total market cap of all 15 listed retail companies, including Future Retail, Shoppers Stop etc. Among brand-led firms, Flipkart’s valuation is comparable with heavyweights such as P&G India and Tata Global Beverages (Tata Global Beverages owns Tata Tea, Tetley and Himalayan). It is also more valuable than 28 banks, including the likes of IDBI Bank, Union Bank, Central Bank of India, etc.


Investment advisory firm Dragoneer Investment, investment bank Morgan Stanley Investment Management, private equity firm Sofina and Vulcan Capital participated in the latest round. Tiger Global – one of the first backers of the Bangalore-based company – also invested.


“It’s the quality of the asset that is attracting investors,” said Raja Lahiri, partner at advisory firm Grant Thornton India. “E-commerce is a cash-intensive business. The top four-five players in this space will keep attracting investments in the next few years.”


Experts point out that the latest fund-raising by Flipkart is an indicator of the growth potential of the Rs 10,000-crore online retailing industry, which is expanding at 54% annually, according to Internet and Mobile Association of India. E-commerce is expected to grow to $200 billion ( Rs 1.2 lakh crore) in India by 2020.


Besides Flipkart, online marketplace Snapdeal has so far raised about $50 million ( Rs 305 crore) while fashion e-tailer Myntra received about $25 million ( Rs 152 crore) in risk capital.


“These new investors are willing to participate again if required like Naspers, Accel, and Tiger. Investor alignment with our strategy is very important,” said Sachin Bansal, 32, co-founder of Flipkart.


Started as primarily an online book store in 2007 by two former Amazon India employees – Sachin Bansal and Binny Bansal – Flipkart has till date raised $541 million (Rs 3,300 crore). In the first phase of this round, Flipkart raised $200 million from South African Internet company Naspers, venture fund Accel Partners, and investment firms Tiger Global and Iconiq Capital.


The company has ventured into payment gateway solutions this year by launching PayZippy. Flipkart, which employs close to 3,000 people, has close to 10 lakh visitors on its website every day.


The company’s revenues were Rs 217 crore in 2011-12, according to a filing with the ministry of corporate affairs. But in 2012-13, it soared to an estimated Rs 2,000 crore.


“Flipkart has got its timing, investments and vertical business strategy right,” said Rajesh Sawhney, angel investor and founder of GSF Superangels. “It will be difficult to replicate Flipkart’s success again, as that phase of scale is already over. New entrepreneurs will have to mine newer verticals.”


The company changed its model from being inventory led to that of an online marketplace earlier this year.


As per India’s current FDI rules, foreign investors are not permitted to invest in branded online retail business. Some experts feel that the change in model is also attracting foreign capital.


The participation by San Francisco-based Dragoneer Investment Group ratifies Flipkart’s success globally. A long-term investor, Dragoneer, has backed companies such as Facebook, Alibaba and 360Buy in the past.


“All our investors think long term; this is patient capital,” said Mr Bansal. “Dragoneer also brings a network that is really helpful.”


With inputs from Ramkrishna Kashelkar


Source:The Economic Times
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