Dispelling past criticism over raising money from only its existing investors, Flipkart has announced the closure of its latest round of funding by raising $160 million from new and existing investors.
The new investors include Morgan Stanley Investment Management, Sofina and Vulcan Capital, and Dragoneer Investment Group.
The existing investor Tiger Global also contributed to $160 million along with new investors. Earlier in July, the company had raised $200 million in July 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 today.
The Bangalore-based company says it will 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.
The key e-commerce players believe this is a positive sign for the industry. For the past one 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, Yebhi.com.
But the competitors are also quick to point that the capital intensive business model of Flipkart will eat up into their funding. There model is capital intensive with high costs of customer acquisition. They need to fix up the model first, said a leading e-commerce player on condition of anonymity.
Experts argue that 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 future plans to raising further funding, Sachin Bansal, Co-founder and CEO 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 is 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 1 crore registered users, and gets over 10 lakh 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, Flipkart.com 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,” Co-Founder and Chief Executive Officer Sachin Bansal said. “We are excited to work with a group of investors who strongly believe in our business strategy and are completely aligned with our long-term goals,” he added.