India’s largest ecommerce player, Flipkart has begun preparations to close a funding round of $550 Mn at a valuation of nearly $16 Bn. The funding will be closed before the month-end, with participation from existing investors, said two people familiar with the development. As per the reports, Tiger Global is leading the round with $100 Mn.
Prior to this, Flipkart had raised $1.9 Bn last year in three rounds from Baillie Gifford, Greenoaks Capital, Steadview Capital, T. Rowe Price Associates and Qatar Investment Authority, DST Global, GIC, ICONIQ Capital and Tiger Global.
However, Flipkart did not comment on the fundraising plans. “This could be the penultimate round of funding before Flipkart explores raising more money in the form of debt later this year. Much of the money will be used to strengthen Flipkart’s technology backbone and its logistics network” said one of the sources.
It is to be noted that over the past few months Flipkart has also hired top tech talent from Google and undergone a reorganisation. As part of reorganisation Co-founder Binny Bansal has been tasked with focusing on the supply chain and logistics. Sachin Bansal, the CEO, is overseeing new initiatives while Mukesh Bansal, who sold fashion portal Myntra to Flipkart a year ago, is in charge of online commerce.
Founded in 2007 by Binny Bansal and Sachin Bansal, Flipkart initially started as a retailer of books, and currently employs over 20,000 and has raised around $2.5 Bn from nearly a dozen investors so far. Presently, Flipkart’s run rate for value of goods sold is estimated at $4 Bn and the company has set itself a target of doubling this to $8 Bn by the end of 2015.
As part of its expansion plans, Flipkart has recently locked India’s single largest office space leasing deal by signing up for a 2 million sq ft custom-built office campus in Bangalore. Besides, it also acquired mobile engagement and marketing automation platform for native mobile apps Appiterate, for an undisclosed amount.
According to the UBS report, online retail market is estimated to be worth $50 Bn by 2020. Also, Goldman Sachs estimated that Indian online retailers such as Flipkart and Snapdeal must collectively raise $20 Bn over next five years to be able to sustain growth.
The homegrown ecommerce firm directly competes with Amazon and Snapdeal in India. Earlier in the last year, Snapdeal raised over $850 Mn, whereas Amazon founder Jeff Bezos had promised to pump $2 Bn in the Indian arm. However, amid this ongoing fundraising competition and deep discounting fever, ecommerce firms are facing high cash burn rates and heavy losses.