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There are two things promoters of Flipkart are not short of these days. One is money and second is ambition. The $1 billion that the company raised in a private equity deal from Morgan Stanley Investment Management, Tiger Global Management and Naspers is the largest deal by an Indian e-commerce company. More surprising than the amount is the valuation and the impact that the deal has on the market.
The $1 billion raised by Flipkart raises the valuation of Flipkart to $7 billion. Ironically the entire e-retailing sector in the country has a turnover of only $13 billion. Flipkart themselves touched a figure of $1 billion of gross merchandise value in March 2014, but still continues to make losses.
Only in May 2014, the company raised $210 million at half the current valuation which was utilised to buy out another ecommerce company Myantra. Within a quarter the joint entity is now worth twice. Interestingly, some of the investors who participated in this round of funding did so at the earlier ones too.
Within a day of the announcement of raising $ 1 bn by Flipkart’s, its main rival in India, Amazon has announced that it will be investing $ 2 billion in its Indian operations. Amazon.com has been in operation in its current form for only one year, yet its founder and CEO Jeff Bezos says that India is on track to be its (Amazon’s) fastest country ever to generate billion dollars in gross sales.
It is probably this opportunity that has encouraged the founders of Flipkart to say that they want their company to be the first Indian internet company to be valued at $100 billion. Rutvik Doshi of Inventus Capital Partners has been quoted in the Indian Express as saying “The reason Flipkart would need funds is because they are scaling up at a very rapid pace. We have roughly 150 million people online, while only 10-15 million transact online. So there is a plenty of headroom for growth. They need to reach out to them. For that, they need a lot of cash.”
And the Bansals only need to look around in their neighbourhood as they dream about the $100 bn valuation. Chinese e-commerce giant Alibaba, whose sales crossed $ 6.5 bn is expected to be valued above $ 150 bn once its IPO concludes this year.
And the Bansals only need to look around in their neighbourhood as they dream about the $100 bn valuation. Chinese e-commerce giant Alibaba, whose sales crossed $ 6.5 bn is expected to be valued above $ 150 bn once its IPO concludes this year.
Those who know the Bansals of Flipkart will not be surprised by the $100 billion mark. The aggression and control on business shown by the promoters in scaling up their venture has attracted investors to the company. Economic Times quotes Subrata Mitra of Accel Partners, one of the first investors in the company as saying that the Bansal’s stand out with their ability to set audacious goals and take big risks. "They have proven to be capable to decide between "build vs buy"...and have the utmost ability to attract large investors to the table," said Mitra.
When Flipkart hit the billion-dollar-sales milestone in February, its first investor Accel Partners, who invested $1 million in 2009, had called it a validation of its early bet.
It is investors like Mitra who are willing to back the promoters in their quest to achieve their $100 billion dream.
