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 recently invested 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
Amazon India is not making things easy for Flipkart in 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 GMV mark in January. Its ‘End of Reason Sale’ 2016 edition’s touched Rs. 100 crore and the company’s revenue multiplied by 20 times.
What’s also helping is that the fashion etailer’s direct competition Jabong is going through a hard time at the moment. It presents a great opportunity for Myntra to 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 source revealed, “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 desire to invest in Flipkart last 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,” mentioned a news article.
Until last year, Flipkart’s valuation was an impressive $15.2 billion. But Morgan Stanley brought it down to $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 recently borrowed Rs. 450 crore from HDFC bank.
Trouble looming ahead? Or will Flipkart bring its valuation up again?
Post a Comment