Indian ecommerce leader Flipkart is working hard to attract investors during the impending funding round. According to company insiders, the online marketplace has vowed to slash its cash burn rate so that the investors are generous with their money. The company’s target is to bring the monthly spends down from $45 million to about $20 million.
Buzz is that American etailer eBay is one of the potential investors that Flipkart is in talks with for funds. Interesting point to remember is that eBay also has stake in Snapdeal.
Prep work for the down round begins
After being regarded as a highly valuable ecommerce unicorn, this probably would be the first time Flipkart would raise funds at a lower valuation. Industry experts think that the new & existing investors would narrow down the Indian etailer’s value at $10-12 billion and the funds would be allocated accordingly.
Flipkart is expecting Rs. 3,400-5,400 crore ($500-800 million) in the fresh round of funding. A source revealed,
“Final valuation could change depending on investor interest and terms of the deal.”
Although, some believe that even $10-12 billion is an inflated figure. According to anonymous Twitter commenter on the Indian start-up ecosystem Unicon Baba, eBay and Tiger Global might invest $800 million in Flipkart at $6-8 billion valuation.
End of the golden period?
Not too long ago Flipkart enjoyed a high valuation of $15.5 billion. But things are drastically different right now. Many top managers have left the company. And several investors have marked down the value of Flipkart’s shares. The top-level reshuffle has resulted in a handful of people handling a mountain of tasks.
American ecommerce giant Amazon’s tactics to win the Indian ecommerce race is also making things difficult for the home-grown player Flipkart.
We’ll know Flipkart’s actual valuation after the fund-raising round. Would it be close to $8 billion or $12 billion? Would cutting down cash burn rate help the etailer to secure more funds? What’s clear is that it would be a down round that no company desires.