Flipkart set to raise $1.5 billion in another round of mega fund-raising

Flipkart isIndia’s biggest online shopping mall and it is now set to raise another mega fund. It will help expand their business and product range catering to widening their base of users. The Bangalore based company is looking for funding of around $1.5 billion and started listing of potential investors, according to 2 persons with direct knowledge of the developments. Flipkart is seeking to target only a few investors that they want to bring on board and the two persons directly involved in the process. So finally the fund raising process is expected to be starting in January 2015.

Flipkart, when contacted, declined comment on its fund-raising and investment plans. The company has raised a total of $1.2 billion  in 2014 and has just completed a round of festival sales marked by steep discounts. The source said that “At the pace at which it is making investments, Flipkart will deploy most of the funds it has raised recently by around middle of 2015.”

The person who works at a strategic level declared that Flipkart will spend Rs.70 crores every month and this amount will be spent towards promotions cost and also discounting still accounts for a chunk of it.

The company has also identified very specific areas to pump in money to ensure its goal of doubling in size by next year.

According to the source report  the Flipkart has posted the blockbuster festive season sales in previous month, when the company shipped around 80 lakh items versus 50 lakh items on average, the company has revised its internal targets to reach sales of $4 billion by the end of the current fiscal year.

The managing director at advisory firm Marsal and Alvarez of Mr. Manish Saigal said that “A major area of focus is increasing the categories in which they have leadership and they built a leadership in fashion with the Myntra acquisition. The same push needs to happen across other categories.” The person who is directly involved in the process said that “Furniture and packaged food will be launched very soon and the teams are being built for these product categories”.

Rival Amazon India recently launched its gourmet and specialty foods category with over 155 Indian and imported brands. Amazon is yet to start furniture. Snapdeal has already a presence in these segments.

The chairman of retail advisory Technopak Mr. Arvind Singhal said that “There are aggressive existing competitors and large offline players could come very soon. It makes sense to extend its leadership now.”

The 7 year old company will start a wider range of lifestyle products and consumer durables. Previously it has wide range of digital accessories, apparels, tablets, personal healthcare products and home appliances such as sandwich makers and hair dryers.

According to a person directly involved with the process, Flipkart will put more marketing muscle behind in-house brands. “Myntra’s in-house brands have performed and scaled. That is what will be done with the new brands.” Its portfolio of about 10 in-house brands account for about 20% of overall sales. Its biker brand Roadster is already a Rs 100 Crore brand.

Flipkart’s share acquisition in consumer appliances service provider Jeeves Consumer Services should be seen in this context. “When they have their own brand of appliances, warranties, handle servicing, and other such issues.

They can’t do this all on their own,” said one of the persons who spoke to ET on this matter. A Flipkart spokesperson said through this partnership, Jeeves will provide exclusive value-added services in online marketplace to Flipkart customers across India.

The Technopak’s Singhal said that “Flipkart and other online retailers will have to invest humungous amounts into logistics and fulfilment if they want to cover all rural areas.” Flipkart has a delivery network of about 300 locations and is intending to expand its reach to even small towns soon.

In each of these areas, Flipkart is also looking at acquisitions.

When Flipkart appointed former Canaan Partners associate Nishant Verman as its M&A head earlier this year, its HR head Mekin Maheshwari said inorganic growth is a strong component of the vision to make Flipkart a $100-billion company. Snapdeal and Amazon have also made their intentions clear to acquire companies in areas ranging from mobile technology to payments.

“The over-arching theme will be acquisitions as they try to bridge existing gaps and scale up faster,” said Alvarez and Marsal’s Saigal.

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