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Mumbai: India’s largest and most-funded e-commerce company Flipkart Online Services Pvt. Ltd acquired Letsbuy.com , the country’s second-largest online electronics retailer, for an undisclosed amount, the third purchase by the five-year-old company in the past two years.

While the company that runs Flipkart.com declined to divulge financial details, MediaNama and VC Circle’s Techcircle.in pegged it at $25-30 million on their respective websites.

Letsbuy.com, which gets 5 million monthly visits, was started in 2009 by eTree Marketing Pvt. Ltd and sells items such as mobile phones, cameras, laptops and home appliances.

Shopping list: A file photo of Sachin Bansal (left), CEO, and Binny Bansal, COO, Flipkart. The firm will continue to scout for more acquisition opportunities. Photo: Hemant Mishra/Mint

“Consolidation is a natural way for things to evolve," said Kanwaljit Singh, managing director, Helion Venture Partners. Helion is an investor in Letsbuy.com. Singh refused to say if the acquisition has offered an exit to the investment firm.

The acquisition also reiterates that e-commerce in India is likely to be dominated by cash-rich companies that can leverage their financial strength for scaling up and strengthening their position, analysts said.

Letsbuy.com, which recently launched categories such as watches, toys, sports and office supplies, works with more than 400 electronics brands. The acquisition is a combination of cash and equity and the founders of Letsbuy.com, along with more than 350 employees, will function independently, Flipkart said in a statement. Letsbuy.com will use Flipkart’s technology platform and supply chain capabilities.

“This acquisition fits into our strategy of building dominant shares in all categories we operate in," said Flipkart co-founder and chief executive Sachin Bansal, adding that the acquisition opportunity came at a “very attractive price... The synergies will now allow us to accelerate faster and get to a share similar to what we enjoy in the online books category."

This is the third acquisition by Flipkart, which began operations in 2007. In 2010, it acquired social book discovery tool WeRead from Lulu, a US-based on-demand publishing firm. Last year, Flipkart acquired Mime360, a unit of Mallers Inc., a Mumbai-based startup that offers an exchange platform connecting content owners with content publishers.

Letsbuy.com founder and chief executive Hitesh Dhingra said the company had a choice to raise a large round of funding as well. However, “aligning the business with the largest player in the market made (more) sense," he said.

Flipkart will continue to scout for more acquisition opportunities and any business that offers access to a larger customer base. “The complementary businesses could include supply chains, payment gateways, brands that have a different positioning," said Binny Bansal, co-founder, Flipkart.

Consolidation could gain ground because of the tightening of capital for e-commerce startups that are looking to raise their next round of funding in the coming months.

“The cost of customer acquisition is higher than average revenue per customer and companies are burning money on each customer," said Deepak Srinath, director of Bangalore-based boutique investment bank Viedea Capital Advisors Pvt. Ltd.

Venture capital investors, who have taken multiple bets in the e-commerce space, could also trigger consolidation, he said. “They may look at consolidating their holdings in companies that are not performing as well as were expected or are not able to raise the next rounds of funding," he said.

Flipkart and Letsbuy have common investors—Tiger Global and Accel Partners.

In 2011, venture capitalists (VCs) and private equity (PE) investors pumped $500 million into 67 deals—the highest number in any year till date, according to VCCEdge, an online tracker of investment activity.

According to the Internet and Mobile Association of India, Internet users in the country have crossed the 100-million mark, of which 17 million are online shoppers. It estimates that the number of Internet users in India will triple by 2015, as will the number of online shoppers.

According to a November report by Avendus Capital Pvt. Ltd on the digital consumer industry, e-tailing is set to become a Rs53,000 crore market by 2015 from the current Rs3,600 crore, but still accounting for just about 1.4% of the Rs36 trillion retail market in India.

Meanwhile, in another e-commerce investment, Bangalore-based e-commerce firm Myntra.com raised $20 million in its third round of funding led by Tiger Global. The news was first reported in Pluggd.in on Thursday. Mukesh Bansal, founder of Myntra.com, could not be reached on the phone, and Mintcould not independently verify the development.

deepti.c@livemint.com

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