Flipkart may raise $500 mn, in talks with investors

Flipkart, the poster boy of Indian e-commerce, is again in talks with investors to raise at least $500 million. The Bengaluru-based company, which raised close to $2 billion in 2014, was discussing fund-raising with existing as well as new investors, sources said.

Flipkart, valued at over $12 billion, is targeting to double the gross merchandise value (GMV) of products it sells to $8 billion by the end of this year. It is likely to use the fresh funds for technology to match the scale of the business and market share.

"They have begun searching for funds again, as the company feels accumulating funds, though not desperately needed at present, is a good strategy. Talks have just started and it may take a few months to finalise the intricacies," a source close to the development said, requesting anonymity.

BRASS TACKS

• $12bn Flipkart's value
   
• $400mn Snapdeal is seeking, according to reports
   
• $2bn Flipkart raised in 2014.
   
• $1bn Snapdeal raised last year, $627 million came from SoftBank
   
• $8bn Flipkart aims to double gross merchandise volume (GMV) to by 2015.
   
• $3bn Snapdeal has increased its GMV target to by March

The upper limit of funding sought by Flipkart could not be ascertained by the Business Standard. Flipkart refused to comment on the matter.

Co-founded by Sachin Bansal and Binny Bansal in 2007, Flipkart has been on a fund-raising spree, resulting in a spiralling valuation. Flipkart raised money thrice during 2014. In December last year, it raised $700 million (Rs 4,900 crore) in fresh investment from existing as well as new investors. Before that, it had raised $210 million (about Rs 1,200 crore) in May and $1 billion (about Rs 6,000 crore) in July.

The July round was the biggest one-time funding in Indian e-commerce history, after which the Jeff Bezos-led Amazon said it would invest $2 billion in the country.

The last round of fund-raising witnessed investment from existing stakeholders DST Global, GIC, ICONIQ Capital, and Tiger Global. Baillie Gifford, Greenoaks Capital, Steadview Capital, T Rowe Price Associates and Qatar Investment Authority were the new investors. Tiger Global and Naspers are the majority investors in Flipkart.

The latest development comes when Snapdeal is also looking to raise about $400 million, according to reports. Snapdeal, seen as the strongest rival of Flipkart, has also accelerated its GMV target to $3 billion by next month. Snapdeal raised close to $1 billion last year, of which a majority ($627 million) came from Japan's SoftBank Corporation.

Flipkart, incorporated in Singapore, has also filed for conversion to a public company, which is mandatory for all companies which have more than 50 shareholders.

The Bansal duo, after a controversial sale late last year, has been working on improving technology for another Big Billion Day sale in 2015. They are also working to launch delivery in real time. This could have higher logistical costs.

While, Indian e-commerce has been abuzz with fund-raising headlines, foreign investment going into these companies is under scrutiny. Foreign investment is not permitted in e-commerce but there is no rule barring it in a marketplace model. Most e-commerce entities in India are operating the marketplace model. Tax issues have also been raised in some states for hosting traders and keeping their inventory in some cases.

Flipkart claims to have 26 million registered users, clocking over eight million daily visits. The valuations of e-commerce companies have been seen in a different light ever since Chinese e-tailer Alibaba notched up a $25-billion Initial Public Offering. Alibaba's market capitalisation exceeds that of Amazon and eBay put together.