India’s largest e-commerce company Flipkart’s recent fundraise of $1.4 billion (around Rs 9,000 crore), the biggest-ever in the country’s burgeoning consumer internet sector, has undoubtedly filled its coffers for now, but it also begs some important questions. Will this be the company’s last round of external funding as it looks to turn profitable? Is a stock-exchange listing by 2019 Flipkart’s next destination?
Sanchit Vir Gogia, Chief Analyst and CEO at Greyhound Research, feels this is a strategic funding round. “It sends a strong message to the investor community that Flipkart wants to change, invest in new businesses and achieve profitability in two years’ time. 2018 will be very critical for Flipkart,” he says.
Gogia of Greyhound Research feels that if Flipkart wants to catapult itself to the next stage, there has to be either a sell-off or, preferably, an IPO.
“A lot of investors have placed huge bets on Flipkart. A PE sell-off, at this juncture, cannot justify the valuation. It has to be an IPO,” he says, adding that Kalyan Krishnamurthy at the helm of the company positions it favourably.
“Binny and Sachin are great innovators, but Kalyan is a matured hand who has seen it all. He understands the consumer side of business and is also good at managing investor sentiment,” Gogia adds.
Gogia feels once the dust around the Flipkart-Snapdeal merger settles down, the e-commerce space will see new players emerging.
“Alibaba has already cracked the Internet e-commerce playbook in one of the most consumerist markets in the world while Paytm Mall has a fantastic back-end transaction infrastructure. The Flipkart-Amazon narrative will trifurcate with the addition of Alibaba. Let us also not rule out Walmart yet, which has a huge sourcing relation with India,” he adds.
This kind of massive investment is the clearest signal that Flipkart is very serious about taking on its local rivals. On the contrary, Alibaba is accelerating its local operations set-up and Amazon continues to dominate with its logistics platform and has an unfair advantage by not being held to the same standards of profitability.