Flipkart and Amazon to invest in companies, thus increase customer base

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Looks like the funding spree will continue in 2015. But the other way round. If news on the block is to be believed, Amazon and Flipkart have plans to invest around Rs 2,300 crore in different services to increase customer base and capture as much of the bludgeoning ecommerce market as possible.

Source: ETRetail

Source: ETRetail

What are Amazon’s plans?

After Jeff Bezos visit to India in July 2014, Amazon had announced plans to invest USD 2 billion in India, without specifying the time frame. It plans to raise Rs 610 crore through a rights issue to its parent. “We will invest in technology, creating infrastructure and logistics services, and specifically on the mobile platform to enable our sellers to deliver to customers across the country a wide selection of products very quickly and reliably,” said a spokeswoman at Amazon India.

What are Flipkart’s plans?

Two weeks back, Flipkart got a fresh round of funding, amounting to USD 700 million from existing and new investors, skyrocketing its valuation to USD 11 billion. And now, reports suggest Flipkart’s plans to  raise Rs 1,300 crore through rights issue with its parent company and to borrow around Rs 400 crore from Kotak Mahindra Bank.

How will they invest?

“Funds are spent on building logistics and supply chain infrastructure. In addition, a substantial amount has been spent on customer acquisition in the form of discounted merchandise, which may have actually gone a long way in drawing customers to ecommerce sites, resulting in heavy cash outflows,” said Rakesh Nangia, founder and managing partner of Nangia & Co., a tax and transaction advisory firm.

So they will use these to invest in companies that would enhance their services and offerings, thus aiding in faster growth and customer acquisition.

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