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Flipkart Raises $1 Bn In Funding, Drops Plans To Go Public

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Flipkart, India's largest e-tailer, said on Tuesday (29 July) it raised a fresh round of funding worth $1 billion as it tries to aggressively scale up after Amazon.com Inc's rapid expansion in the country has heated up competition. The funding is the largest so far in the fiercely competitive online shopping segment in the country, valuing it around $7 billion, a substantial jump from its last valuation of around $5- 6 billion only about two months ago.

Flipkart, founded in 2007 by two former Amazon employees, has raised $760 million since its launch and the recent funding round is the largest for an Indian e-tailer.

The company did not disclose its new holding pattern.

Co-led by existing investors Tiger Global Management and Naspers, the funds will be used to make long-term strategic investments in India, especially in mobile technology.

Singapore’s sovereign wealth fund, GIC, along with existing investors Accel Partners, DST Global, ICONIQ Capital, Morgan Stanley Investment Management and Sofina, also participated in this latest financing round.

Earlier this year Flipkart acquired fashion portal Myntra in a reportedly Rs 200-crore deal and crossed $1 billion in gross merchandise value.

Flush with cash, Flipkart is also scouting for acquisitions, which can help it expand into newer technologies like wearables and robotics, a move that it believes will impact mobile commerce in the days to come.

"The funds will be used to make long-term strategic investments in India, especially in mobile technology," Flipkart co-founder and CEO Sachin Bansal told reporters in Bangalore.

Flipkart’s founders Sachin Bansal and Binny Bansal, said “We believe the internet will improve the quality of life for millions of Indians, and e-commerce is going to play a huge role in this change. The focus at Flipkart is to continue to make shopping online simpler and more accessible through the use of technology".

The focus at Flipkart is to continue to make shopping online simpler and more accessible through the use of technology, he added.

"This funding will enable us to step up our investments for innovations in products and technologies, setting us up to become the mobile e-commerce company of the future. This funding will help us further accelerate momentum and build our presence to become a technology powerhouse," he said.

On the company's IPO plans, Bansal said: "IPO is not in consideration at all, we are not thinking about it. We have not settled on a business model that we can take public."
 
In May, Flipkart had raised $210 million funding, bringing private equity firm DST Global on board as an investor.
It is estimated that the firm has, so far, raised over $1.7 billion from investors, including the current transaction.

The Bangalore-based firm, founded by Sachin Bansal and Binny Bansal, counts Accel Partners, Dragoneer Investment Group, Morgan Stanley Investment Management, Sofina and Vulcan Capital among its other investors.

Flipkart has close to 22 million registered users today. It handles 5 million shipments a month. These numbers were unheard of a few years back. "we are excited about the scale we have managed to achieve. But what is even more exciting is the huge opportunity that we still see before us, they added.

India has 243 million internet users – and this number continues to grow very fast. We want to enable every Indian to either shop or sell online. And we believe that the power of the mobile internet is going to help us achieve this goal.
 
Great News For Indian E-commerce
Rohan Bhargava, Co-Founder, Cashkaro.com, India's largest cashback and coupons site said, "The one question that is on everyone’s mind is “What would Flipkart do with all the money?’ In fact, Flipkart raising such a huge round is great news for Indian ecommerce. The deployment is expected to be varied. There is a lot of depth in the Indian market. India is a several countries within a country and there is a  huge scope and merit in exploring it.  As the portal will open up to more users in India itself, more marketing spends would encourage more shoppers to come online which again is great for the combined ecommerce eco-system.

The other side of the coin is becoming the next Amazon of the world. Is there merit in expanding to the West? Flipkart will go from being a market leader in India to a struggling entrant in the US, UK etc. against big guns like Tesco, Macy’s. Whether organic or inorganic, Flipkart will have to throw a lot of money into building a brand and venture region by region. I believe these funds are best deployed in India itself, capitalising on the opportunity here and being well equipped to deal with new entrants, especially global players. This will ensure a great IPO in a few years. It is hard to say whether this will be the last funding round before IPO, maybe not but at the moment the priority will be well thought out deployment of capital than an IPO."

Competition From Amazon
Amazon, which entered India last June, has taken on rivals by slashing prices, launching next-day delivery, adding new product categories and embarking on a high-voltage advertisement campaign.

The companies vying for a bigger slice of the Indian online retail market include Flipkart, New Delhi-based marketplace Snapdeal, fashion e-tailer Jabong, and global giants Amazon and eBay Inc.

The Indian e-commerce market was worth $13 billion in 2013, with online travel accounting for over 70 percent of consumer e-commerce transactions. Online sales of retail goods totaled $1.6 billion in 2013, according to research firm Forrester, and are expected to reach $76 billion by 2021, Technopak said.

By comparison, China's business and consumer e-commerce sales may surpass $180 billion this year, with industry leader Alibaba readying an initial public offering (IPO) in the United States.