Tuesday 8 November 2016

Flipkart still looking for investments to raise valuation; In talks with Walmart and CPPIB for funding

Flipkart’s valuation has been getting dimmer by the quarter. In March, its parent company in Singapore reduced equity investments by 70%. And the etailer’s million dollar cash burn rate has left with limited reserves of spending cash.
The online marketplace is looking at turning things around with the help of foreign investors. It has its sights on raising $1 billion by the end of the year. Flipkart is at its 13th round of funding since the month of July in 2015 when it’s valuation was $15billion after it raised $700 million from Tiger Global Management and Steadview Capital.
The etailer’s valuation is now $11 billion on account of investors pulling out investments due to the etailer’s inability to meet 2015’s sales and revenue targets.
Its competitor Amazon.in received $5 billion over the last 5 years from its parent company back in the US.

Aiming for foreign investment

The Indian ecommerce company is scoping for foreign investment to meet its fundraising goals. Two sources say that Flipkart is trying to seek funds from two foreign companies – Canada Pension Plan Investment Board (CPPIB) and Walmart.
CPPIB has been very active in the Indian market ever since it opened an office here a year ago. It has invested in many big Indian firms like L & T Infrastructure Development Projects and Kotak Mahindra Bank. Flipkart could be the Canadian company’s first ecommerce investment in the country.

Renewal of investment deal with Walmart?

Flipkart was in talks with Walmart for strike an investment deal of about $70 million to $1 billion in exchange for a stake in Flipkart. However, by the end of last month, the deal turned sour.
But now it appears that the Indian online retail company is still talking to Walmart about the sale of a minority stake to the foreign company. A partnership with Walmart can help Flipkart take on international competitors like Amazon and Alibaba.

Does Walmart still benefit?

It certainly does! Industry watchers claim that if Walmart goes on to invest in Flipkart it will do so with the intent of getting into Indian online grocery. The American company has been looking for a chance to explore ways into the food and grocery segment since the FDI rules were relaxed by the Center.
An industry expert states, “Wal-Mart will have to choose between investing in an established e-commerce player like Flipkart and investing in its existing cash & carry business.”
Flipkart looks like a more strategic option that could help the foreigner take on Alibaba it’s major international rival.

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