Flipkart Background : Flipkart, an online e-commerce company, was founded by Sachin Bansal and Binny Bansal ( IIT, Delhi, Alumni ), in 2007 with headquarters in Bengaluru. Post spending initial capital on setting up the website, the fresh capital was raised in multiple rounds from several prominent venture capital firms including Accel India, Tiger Global, MIH, ICONIQ Capital, Dragoneer, Morgan Stanley, Sofina, Vulcan, DST Global, GIC - Singapore , Tencent and Softbank over a period of 10 years. The company initially sold online books on the portal and it kept on adding more products to its basket, thereby making it largest e-commerce company in India. Flipkart has several in-house brands namely, Citron, Digiflip, Billion, Smartbuy and MarQ. In the process of inorganic growth path, it acquired weRead, mime360.com, Letsbuy, ebay India, Jabong and myntra among others.
Flipkart posted a top line growth on 29% to reach a revenue of Rs 19,854 crores for the year ended March 2017. The company's losses reportedly mounted to Rs 8,771 crores, which were reportedly 68% higher than previous year, including a fair value loss of Rs 3,412 crores on derivative financial instruments. The pace of growth in revenue has fallen from triple digit to 29% over a period of time, as the base level has grown higher. One would wonder why Walmart is acquiring a loss making company by investing US $ 16 billion, but it would be pertinent to note e-commerce company has a long gestation period when it keeps expanding its consumer base, by launching periodical discount and promotion offers. The reported employee strength was 30,000 in 2016. It would be difficult to make money just from online retail business, as rivals Amazon and Alibaba make windfall from cloud services and advertising.
The Deal : Walmart, in the world's largest e-commerce acquisition deal, acquired Flipkart for US $ 16 billion valuing it over US $ 20 billion. Walmart would own around 77% in what is being seen as biggest investment by US giant retailer. Walmart had earlier entered into a joint venture with Bharti group in cash-and-carry segment, which it broke 4 years ago. Flipkart has more than 40% market share in the online e-commerce space followed closely by Amazon. Softbank is uncertain about its exit from Flipkart where it owns 22% stake, The position would get clear in the days to come. One of the promoters Sachin Bansal would exit from Flipkart while Binny Bansal would continue to be part of the Management team. Walmart is planning to infuse additional US $ 2 billion into Flipkart, which will not only provide additional funds but also a formidable partner with proven track record in retailing, logistics and supply chain management.
While the entry of Walmart into Indian market has sent jitters among small online sellers, as it would be question of their survival, but it would be a big economic boost for India. This is likely to create more jobs in the time to come, and consumers would be beneficiary as price war between Flipkart and the Amazon would intensify. In addition, the product basket would get amplified.
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