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Flipkart invests $201 million in Indian wholesale unit
The fresh outlay by Flipkart comes it seeks to fight off the challenge from Amazon to keep its leadership of India's growing $18 billion online retail market, and a regulatory tussle with the government
Bengaluru: Flipkart’s Singapore-incorporated parent has infused ₹ 1,431 crore ($201 million) into its wholesale entity in India amid an intensifying and costly battle for market share with Amazon.com Inc.
The latest fund infusion from parent Flipkart Pvt. Ltd was approved in December. In the same month, the Singapore-listed entity infused roughly ₹ 2,190 crore ($304 million) into the local unit, show regulatory filings sourced from business intelligence platform Paper.vc.
The fresh outlay by Flipkart comes as the Walmart-owned company seeks to fight off the challenge from Amazon to keep its leadership of India’s growing $18 billion online retail market, and a regulatory tussle with the government, which has issued new foreign direct investment rules for e-commerce firms that threaten to upend the online retail industry.
Mint reported on 1 October that Flipkart had begun talks with strategic investors to raise fresh capital after discussions with Google collapsed last year.
Flipkart is expected to spend billions of dollars over the next few years as it looks to keep its supremacy in the e-commerce market against a resurgent Amazon. On 22 May, Mint reported that Flipkart was likely to burn as much as $2 billion in cash over the next 18 months—an affirmation that sales growth, rather than cutting losses, remains the top priority for the online retailer after being acquired by Walmart.
In a December interview, Flipkart’s chief executive, Kalyan Krishnamurthy, said the company had witnessed transaction growth of more than 80% in some months as e-commerce was booming again and the company planned to push newer categories such as furniture and groceries over the next three years. Krishnamurthy also indicated that Flipkart might start a video content business, either through a partnership or by developing a new business internally.
Flipkart’s payments arm, PhonePe, may also raise funds separately as it seeks to catch up with bigger rival Paytm. Walmart has indicated it is willing to continue funding PhonePe in the near future, but the US retail giant is open to the idea of bringing in more strategic partners.
If PhonePe adds strategic investors outside Walmart, it may look to raise up to $1 billion sometime this year, Mint reported in October.
PhonePe’s position inside the group has gained even more prominence over the past few months, following Flipkart co-founder Binny Bansal’s exit and Walmart’s decision to absorb online fashion retailer Myntra into Flipkart.
While Myntra executives now report to Flipkart CEO Krishnamurthy, PhonePe has remained independent within the group and its founders, Sameer Nigam and Rahul Chari, now report directly to the Flipkart board—a clear sign that PhonePe may be spun off to bring in external strategic investors, even as Walmart retains a majority stake in the payments entity.
Amazon has also been burning hundreds of millions of dollars as it looks to upend Flipkart’s leadership position.
Mint research shows that the Seattle-based Amazon has nearly exhausted its original $5 billion commitment towards India and may soon have to invest more into its business in the country.
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First Published:16 Jan 2019, 03:24 PM IST
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