Flipkart has raised the biggest round of funding by an Indian Internet firm, setting the stage for a battle with Amazon for supremacy of the Indian online retail market. Singapore's sovereign wealth fund GIC became the latest investor to put its faith in India's largest online retailer by participating in the $1-billion (Rs.6,000 crore) funding round that values Flipkart at $7 billion.
The funding was led by existing investors Tiger Global and Naspers with participation from Accel Partners, DST Global, ICONIQ Capital, Morgan Stanley Investment Management and Sofina. Dragoneer and Vulcan Capital, who first invested in the company last year, did not take part in this round.
The seven-year-old company has so far raised over $1.7 billion in risk capital. In May , it sucked in $210 million led by Russian billionaire Yuri Milner's DST Global a few days after announcing its acquisition of fashion portal Myntra for an estimated $370 million. Sachin, who has in the past spoken of a US listing in 2015, said an IPO is not on the cards for the next two years.
Seattle-headquartered Amazon has become aggressive in India. In about 13 months it has launched 28 categories of products and has grown to host 8,500 merchants on its platform.
The funding will mean more pressure for Snapdeal, which raised over $233 million from investors like Temasek and Premji Invest earlier this year. Amazon has matched Snapdeal in terms of sales, with the two firms having sold about $600 million (over Rs.3,600 crore) worth of products each, according to multiple people who have direct knowledge of the firms' financial details. Both could reach $1 billion in sales this fiscal. Flipkart reached this milestone last fiscal. But Sachin said his focus is solely on Flipkart. “We are not thinking about competition. This funding gives us the opportunity to shape the market in a way that we want,“ he said.
Binny Bansal, 31, cofounder and chief operating officer, said logistics as well as payment and mobile technologies will be the areas where Flipkart expects to spend the most. Also getting attention will be small businesses which Flipkart will handhold and bring online.Mobile has become a priority area for Flipkart, with over 50% of sales through handheld devices. So are payments where it could look at acquiring a firm.
Flipkart has previously acquired for depth in product categories and for new technology. This could continue, said experts. Apart from tech buyouts, the company could look at acquisitions in categories like furniture. Portal such as Pepperfry and Urban Ladder, which raised funding in the past few weeks, are seen as likely targets. Flipkart's most recent acquisition, fashion etailer Myntra, has worked out well for them so far.
Jeff Bezos said he will spend $2 Billion (Rs.12,000 crore) to grow Amazon's online retail business in India in what amounted to a dare to Indian market leader Flipkart which only on Tuesday announced raising $1 billion in funding from a bevy of global investors. This is the strongest indication by the Seattle-based Internet entrepreneur of his intent to battle for top honours in the Indian online retail market where Amazon is on track to record sales of over Rs.6,000 crore in just over a year of operations. “We've never seen anything like this,“ said Bezos, the founder and chief executive officer of Amazon. “After our first year in business, the year in business, the response from customers and small and medium-sized businesses in India has far surpassed our expectations,“ he said in a statement on Wednesday
By making this announcement within a week of Amazon declaring a loss of $126 million on revenue of $19.34 billion in second quarter of 2014, Bezos is seen to be signalling in no uncertain terms his commitment to grow his business in India after having failed to make inroads in the Chinese online retail industry dominated by Jack Ma's Alibaba Group. “We see huge potential in the Indian economy and for the growth of e-commerce in India. Our team can continue to think big, innovate, and raise the bar for customers in India,“ he said.
Amazon's aggression is already apparent it now sells over 17 million products across 28 categories and hosts 8,500 merchants on its platform -and that is expected to only increase. Earlier this week it opened five more warehouses, almost doubling its storage capacity to over half million square feet. “From day one, our ambition has been to be India's most customercentric company,“ said Amit Agarwal, vice-president and country head of Amazon.in. Investments in product categories, logistics, increasing seller base and in mobile technologies will increase, according to the 40-yearold Amazon executive who reports directly to founder Bezos.
The war in the Indian online retail space is being fought on the mobile platform. Amazon said about 35% of all sales in India come through mobile devices while Flipkart and Snapdeal claim that nearly 50% of all transactions are on hand-held devices.
By stepping up to tell the world about Amazon's progress in India, Bezos wants to assure customers that his firm is here to stay while at the same time declaring war on his rivals, primarily Flipkart. “It is abnormal for Bezos to talk about numbers. He never talks about investments or top line.This shows how important India is to Amazon. This is completely new,“ said a senior executive at a consumer internet company who until last year was employed at Amazon. “He wants to show that if Flipkart spends one dollar, Amazon will spend two.“
At present, Amazon is believed to be running neck-to-neck with Snapdeal, with both companies having sold about $600 million (about Rs.3,600 crore) worth of products this year so far, with an aim to clock sales of $1 billion this fiscal, according to several people privy to the firms' financial details.
Flipkart, which notched up gross sales of $1 billion in March, is expected to close this fiscal with sales of $3 billion (Rs.18,000 crore).
All top etailers in the country have been running continuous deep discounts, up to 85% in some cases, for the past few months.
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