Flipkart set to raise $1.5 billion in another round of mega fund-raising

10 Nov,2014

By Radhika P Nair


India’s largest online retailer, Flipkart, could begin another round of mega fund-raising as it expands its product range catering to a widening base of customers. The Bengaluru-based firm will seek funding of about $1.5 billion and has begun shortlisting potential investors, according to two people with direct knowledge of the developments. “Talks haven’t begun yet and Flipkart is looking to target only a few investors that they want on board,” said one of the two persons directly involved in the process. “The fund-raising process is expected to begin in January 2015.”


Flipkart, when contacted, declined comment on its fund-raising and investment plans. The company has raised a total of $1.2 billion this year and has just completed a round of festival sales marked by steep discounts. “At the pace at which it is making investments, Flipkart will deploy most of the funds it has raised by around mid-next year,” said the source.


Discounting still accounts for a chunk of Flipkart’s monthly costs, with promotions costing it at least Rs 70 crore each month, according to a person who works with Flipkart at a strategic level.


The company has also identified very specific areas to pump in money to ensure its goal of doubling in size by next year.


Post the blockbuster festive season sales of October, when the company shipped around 80 lakh items versus 50 lakh on average, the company has revised its internal targets to reach sales of $4 billion by the end of the current fiscal, according to sources.


A major area of focus is increasing the categories in which they have leadership. “It has built a lead in fashion with the Myntra acquisition. The same push needs to happen across categories,” said Manish Saigal, managing director at advisory firm Alvarez and Marsal.


“Furniture and packaged food will be launched very soon,” said a person directly involved in the process. The teams are being built for these product categories.


Rival Amazon India recently launched its gourmet and specialty foods category with over 155 Indian and imported brands. Amazon is yet to launch furniture. Snapdeal, on the other hand, already has a presence in these segments.


“There are aggressive existing competitors and large offline players could come in very soon. It makes sense to extend its leadership now,” said Arvind Singhal, chairman of retail advisory Technopak.


The seven-year-old company will launch a wider range of lifestyle products and consumer durables. It already has its range of tablets and digital accessories (Digiflip), apparel (Flippd) and home appliances and personal healthcare products such as sandwich makers and hair dryers (Citron).


According to a person directly involved with the process, Flipkart will put more marketing muscle behind in-house brands.


“We have seen how Myntra’s inhouse brands have performed and scaled. That is what will be done with the new brands.”


For Myntra, its portfolio of about 10 in-house brands accounts for about 20% of overall sales. Its biker brand Roadster is already a Rs 100-crore brand.


Flipkart’s stake acquisition in consumer appliances service provider Jeeves Consumer Services should be seen in this light. “When they have their own brand of appliances, they will have to handle servicing, warranties and other such issues.


They can’t do this all on their own,” said one of the persons who spoke on this matter. A Flipkart spokesperson said through this (strategic) partnership, Jeeves will provide exclusive value-added services in ecommerce to Flipkart customers across India.


“Flipkart and other marketplaces will have to invest humungous amounts into logistics and fulfilment if they want to cover even rural areas,” said Technopak’s Singhal. Flipkart has a delivery network of about 300 locations and is intending to expand its reach to even small towns.


In each of these areas, Flipkart is also looking at acquisitions.


When Flipkart appointed former Canaan Partners associate Nishant Verman as its M&A head earlier this year, its HR head Mekin Maheshwari said inorganic growth is a strong component of the vision to make Flipkart a $100-billion company. Snapdeal and Amazon have also made their intentions clear to acquire companies in areas ranging from mobile technology to payments.


“The over-arching theme will be acquisitions as they try to bridge existing gaps and scale up faster,” said Alvarez and Marsal’s Saigal.


Source:The Economic Times

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