Flipkart plans to raise up to $1 billion fresh funds

New Delhi/Bengaluru: After generating bumper sales during its flagship Big Billion Days (BBD) sale this month, Flipkart plans to hit the market to raise a new, large round of funds before the end of the year, three people familiar with the matter said.

Flipkart will look for new investors to lead the next round, the three people said on condition of anonymity. The company hasn’t decided the final amount yet, but will look for at least $500 million and up to $1 billion in fresh funds, the three said.

The fund-raising talks will be led by Flipkart chairman Sachin Bansal and Tiger Global Management, Flipkart’s largest investor, will play an important role in the process, they said.

“The problem till now was that sales had slowed down and the (e-commerce) market also declined. In a young market like India, that is shocking. So Flipkart was in no shape to go for a fund-raise. The plan was to go all in on BBD and if that worked out, to do a fund-raise. BBD was phenomenal so you can expect them to hit the market in November-December,” one of the three people cited above said.

A Flipkart spokesperson didn’t respond to e-mails or calls seeking comment.

US-based Wal-Mart Stores Inc., the world’s largest retailer, and China’s Alibaba Group have been mentioned as potential investors in Flipkart. The Economic Times newspaper reported on 27 September that Wal-Mart Stores had held early talks with Flipkart for an equity investment.

The three people cited above said that while Wal-Mart and Flipkart had held discussions, there was no clarity on whether the companies want to enter a business partnership or an investment deal.

Flipkart last raised funds in the middle of 2015, when existing investors including Tiger Global Management and Qatar Investment Authority pumped in about $700 million into the company at a valuation of $15 billion. Since then, the e-commerce firm has been turned down by investors, who balked at the valuation at which it sought funding, amid concerns about ballooning losses and Amazon India’s market share gains.

These concerns played out starkly over the past six months. Amazon generated higher sales than Flipkart on a stand-alone basis for July and August. (When sales from its fashion websites Myntra and Jabong are included, Flipkart was still ahead.)

But Flipkart bounced back this month, outselling arch-rival Amazon India during the first sale event of the all-important festive season, recording unit sales of 15.5 million compared with 15 million units for the US-based online retailing giant, Mint reported on Friday. Flipkart Internet Pvt. Ltd generated gross sales of at least Rs3,000 crore during the five-day BBD sale, which ended on Thursday.

After Binny Bansal took over as chief executive officer in January, the online marketplace also moved to slash its monthly expenses by 50% or so.

Flipkart boasts of a booming fashion business in Myntra and has added a digital payments unit, PhonePe.

Along with the revival in sales, these moves will boost the company’s chances of securing a new round of funds on its terms, the three people cited above said.

Flipkart’s fund-raising efforts will be among the most important events for Indian start-ups. If the company is able to attract funds at its existing or higher valuation, it may lead to a strong revival of investor interest in Indian start-ups.

While most analysts don’t expect a return of the go-go days of 2014 and early 2015, a large fund-raising by Flipkart will help improve investor sentiment toward start-ups.