Flipkart looks to raise funds via investment banks; easy funding days over?

In July 2014, Flipkart had made a record by raising a staggering $1 billion (more than Rs 6,000 crore), which was the largest sum raised in one funding round by a company in international e-commerce. Exactly a year later, the home-grown etailer raised another $700 million (Rs 4,500 crore).

But in 2016, the funding exercise looks different and difficult for Flipkart.

Looking to raise funds through investment banks

After going back and forth (we don’t need money), Flipkart finally accepted last month that it is ready to raise fresh funds. But due to its inability to raise capital on its own, Flipkart is now planning to grab fresh dollars with the help of investment banks, according to a news report.

The etailer’s plan is to rope in an investment bank that will negotiate the funding deals on their behalf with the new investors. Company insiders revealed that talks have taken place with potential banking firms like American multinational finance company Goldman Sachs and few others.   

The downs

Buzz was that Flipkart was in talks with Canada Pension Plan Investment Board (CPPIB) and Walmart for an investment deal. But the Walmart deal failed after the news about Flipkart’s inconsistent financial reports came out.

Besides the shaky accounting practices, other reasons why funding for Flipkart is drying up are exit of top executives, constant devaluation by investors and a strong rival Amazon.

So far, higher valuations helped the Indian etailer to get millions and millions of investment from foreign investors who were looking to explore the Indian ecommerce industry. But now, no investor is willing to accept Flipkart’s chosen valuation (right now it is around $15 billion) figure. Many think that the etailer is one of the most overvalued companies.

The growing market share of Amazon is another cause of concern for investors. Flipkart is still the leader as far as the Indian ecommerce industry is concerned. But the American etailer is ahead of the Indian players on many fronts.

In addition, Amazon India is a company with deep pockets and the unwavering vision of “not to bother about customer acquisition costs but to single-mindedly pursue growing market share to gain market leadership,” even if it means $1 billion loss.

Flipkart may find it difficult to find new investors with the same unwavering vision like Amazon.

Will things look up?

The renewed strategies implemented by CEO Binny Bansal and Business Head Kalyan Krishnamurthy could help Flipkart to retain its leadership position.  The taskmasters made sure that Big Billion 2016 is one of the biggest revenue generating sales.  NPS over GMV, expanding logistics network, and reducing cash burn are some of other strategies that the duo worked on.