Flipkart raises Rs 990 cr from new and existing investors

This comes just three months after the online retailer raised Rs 1,200 cr through multiple investors

Dispelling past criticism over raising money from only existing investors, Flipkart has announced the closure of its latest round of funding by raising $160 million (Rs 990 crore) from new and existing investors. The new investors include Morgan Stanley Investment Management, Sofina and Vulcan Capital, and Dragoneer Investment Group.

Existing investor Tiger Global also contributed to $160 million along with new investors. In July, the company had raised $200 million (Rs 1,200 crore) from some existing investors, including Naspers.  “With this, the total funds raised in this round stand at $360 million – the single-largest amount to be ever raised by any Indian internet business,” the Bangalore-based firm said in a release on Wednesday.

The firm would invest these funds to further build its technology and supply chain capabilities, develop a talent pool, and enhance the end-user experience, the release said.

Key e-commerce entities believe this is a positive sign for the industry. For the past year, the funding environment has been tough. It has been difficult to raise money through external investors. This is a good message for e-commerce ecosystem, said Nikhil Rungta, chief business officer at Yebhi.com.

However, competitors are quick to argue that the capital-intensive business model of Flipkart, with high costs of customer acquisition, will eat into the funding. Flipkart needs to first fix the model, said a leading e-commerce player on condition of anonymity.

According to experts, the challenges are not limited to Flipkart but a concern for the wider e-commerce sector. From the perspective of expansion, it’s a positive sign. But the challenges are multi-fold across the sector.

High cost of customer acquisition, customer retention, profitability on each transaction are the challenges that lie ahead, said Gaurav Gupta, senior director, Deloitte India

When asked about its plans to raising further funding, Sachin Bansal, co-founder and chief executive officer of Flipkart, told Business Standard that currently they are ‘extremely well funded’ and ‘on way to achieve 2015 goal of $1 billion GMV’. Bansal also said that the issue of profitability was not the priority for them.

‘We can be profitable today if we choose to be. But for us, the key issue is not profitability but growth. It’s  long term game’, said Bansal. Flipkart.com, which has been in operation since 2007, offers products across 17 categories.  The online retailer has around 10 million registered users, and receives over one million unique visitors each day. To compete in the evolving Indian e-commerce space, Flipkart.com has been expanding its offerings over the past years.

Since June 2012, the company has added several new categories such as apparel, footwear, toys, sun glasses , home furnishings, accessories, sports and fitness, and eBooks.

“India’s e-commerce market is at a critical inflection point and this additional capital will allow us to further expand our leadership position,” said Bansal.
FUNDS RAISED SO FAR

2013:  $360 million in two phases

• $200 mn in July 2013 from Naspers, Accel Partners, Tiger Global & Iconiq Capital
• $160 mn in October 2013 from Dragoneer Investment, Morgan Stanley, Sofina, Vulcan Capital, Tiger Global

2012: $150 mn from Naspers, Tiger Global, Accel Partners
2011: $20 mn from Tiger Global
2010: $10 mn from Tiger Global
2009: $1 mn from Accel Partners
Source: Company announcements, industry data