Flipkart India’s loss rises 9-fold amid growth at a fast clip2 min read . Updated: 29 Oct 2018, 06:44 AM IST
Although the results pertain to the period prior to the Flipkart-Walmart deal, it highlights the challenges Walmart will face in turning around Flipkart amid stiff competition from Amazon India
Bengaluru: Flipkart India Pvt. Ltd, the wholesale entity of the country’s largest online retailer owned by US-based Walmart Inc., had a tough 2017-18 with its net loss widening nine-fold, although the company managed to grow its business at a fast pace. The marketplace arm, Flipkart Internet Pvt. Ltd, however reported narrower losses and a significant pickup in growth, according to regulatory documents sourced from Tofler and Paper.VC.
While Flipkart Internet books commissions on each sale through its app or website, the wholesale unit sources goods and sells them to third-party sellers who, in turn, sell them to shoppers.
Although the results pertain to the period prior to Walmart’s $16-billion buyout of Flipkart, it highlights the challenges the new owner of India’s largest online retailer faces to turn around the company amid a bruising battle for market leadership with Amazon in the world’s fastest-growing economy.
The high-stakes market share battle against Amazon India will require Flipkart to spend heavily to maintain its slender lead over its rival.
For the year ended March 2018, Flipkart India’s revenue rose 39% to ₹ 21,658 crore from ₹ 15,569 crore in the year earlier. Net loss widened nine-fold to ₹ 2,065 crore.
Flipkart attributed the higher losses to a spike in employee benefit expenses, finance costs, and an increase in the purchase of traded goods.
A spokesperson for Flipkart did not immediately respond to an email seeking comment on the company’s earnings.
In the same period, Flipkart Internet’s revenue rose 36% to ₹ 3,060 crore from ₹ 2,253 crore in the previous year. Net loss narrowed to ₹ 1,159 crore from ₹ 1,639 crore.
Since Flipkart started out in 2007, the company has adopted a complex corporate structure to accommodate all its subsidiaries, since India bans foreign direct investment in online retail. The two Flipkart entities—Flipkart India and Flipkart Internet—generated roughly ₹ 24,718 crore in 2017-18 compared to ₹ 17,822 crore in the previous fiscal.
After Walmart’s buyout of Flipkart in May, the US-based retail giant had disclosed that the Flipkart Group (which includes Myntra and PhonePe) generated gross merchandise value of $7.5 billion (before product returns), with net sales of $4.6 billion, in the last financial year.
In October, Walmart cut its earnings forecast for this year because of losses expected at Flipkart.
Mint had in May reported that Flipkart is likely to burn $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 its takeover by Walmart.
Both Flipkart and Amazon are expected to spend several billions of dollars over the next 5-10 years in their quest to dominate India. Last week, Amazon highlighted the importance of India to its global ambitions, as it blamed a late Diwali in India for a slowdown in its international sales during the September quarter.