Flipkart pumps over $50mn in Myntra; expects to raise $1bn in a down round
Millions of funds are going in and out of the ecommerce giant Flipkart’s pocket. First, let’s talk about the outgoing money.
The marketplace recentlyinvested over $50 million(Rs. 338 crore) in its fashion arm, Myntra. This will help the fashion etailer to reach its profitability target and retain its leadership position in the online fashion industry.
High hopes placed on Myntra
AmazonIndia is not making things easyfor Flipkartin the online marketplace business side. However, its fashion vertical Myntra is performing well. That’s why the parent company is pouring funds to ensure that at least in the online fashion segment, it continues to rule.
Myntra hit the$800 million GMVmark in January. Its ‘End of Reason Sale’ 2016 edition’s touchedRs. 100 croreand the company’s revenue multiplied by 20 times.
What’s also helping is that the fashion etailer’s direct competitionJabongis going through ahard timeat the moment. It presents a great opportunity forMyntrato knock off its rival.
Flipkart likely to raise $1 billion in a down round
Now let’s talk about the incoming funds.
Buzz is that Flipkart is expecting to raise $1 billion. In addition, it is rumored to be a down round of funding.
A sourcerevealed, “The funding is now delayed and should take another 3-4 months. A downround is certain.” Alibaba is named as one of the possible investors besides Fosun Group.
The Chinese ecommerce leader had expressed its desireto invest in Flipkartlast month.
What’s a down round?
Raising a down round means investors values the companies at less than the previous high-valuation rounds of funding.
What are its implications?
“Down rounds can bring in much-needed cash that can give a company time to find a business model or turn things around. But they create complications for both past and future investors. And they are one of the most demoralizing things that can happen to a startup,”mentioneda news article.
Until last year, Flipkart’s valuation was an impressive$15.2 billion. But Morgan Stanleybrought it downto $11 billion. It’s quite possible that the etailer’s recent devaluation will affect this fresh funding and hence the murmurs about it being a down round. The etailer also recentlyborrowed Rs. 450 crorefrom HDFC bank.
Trouble looming ahead? Or will Flipkart bring its valuation up again?