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With New $3.6B Funding, Is Flipkart Closer to an IPO?

Investor confidence in Flipkart and the overall e-commerce ecosystem in India is building—so much that the Walmart-owned online giant secured $3.6 billion in funding. The new funding is well ahead of the initial $1 billion to $2 billion investment speculation that was initially floated in May and brings the company’s IPO chatter back to the fore.

This round of funding was led by financial investors including Signapore-based GIC, the Canada Pension Plan Investment Board, SoftBank’s Vision Fund 2 and Walmart.

The investment gives Flipkart a $37.6 billion post-money valuation, Flipkart said. The round reduces Walmart’s stake in the company from approximately 82 percent to around 75 percent, according to the Wall Street Journal.

Walmart has previously stated that it supports an IPO for Flipkart, amid a Reuters report that it sought a $50 billion valuation for the online retailer’s public listing. The March report said Flipkart was in talks in the U.S. for a deal to go public through a blank-check firm.

India’s overall e-commerce market is still budding, and Flipkart sees its ground floor entry as a major advantage. In 2020, India’s e-commerce sales hit $60.5 billion, and it’s expected to reach $111.3 billion by 2024, according to research from GlobalData.

According to Forrester Research, by October 2020, Flipkart had 31.9 percent market share, making it the largest online retailer in India. Meanwhile, Amazon India was slightly behind in second, with a 31.2 percent market share.

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With this development, Flipkart says it will continue to make “deeper investments” across people, technology, supply chain and infrastructure to address the requirements of a rapidly growing consumer base in India. In particular, the group said it wants to work with the Indian fashion industry and help small businesses explore untapped opportunities that e-commerce technology presents.

Flipkart said it is currently expanding its grocery and last-mile delivery programs and will also continue its work with kiranas—India’s local “mom and pop” stores—to help them digitize and grow. The group works with more than 1.6 million kiranas in India through its wholesale business and its last-mile delivery program, in an effort to encourage employment creation in the ecosystem. In addition, Samarth, Flipkart’s program to support small businesses, underserved communities and artisans, has more than 750,000 beneficiaries.

The company’s investments come as top competitor Amazon has committed to bringing 1 million small businesses into its online “Local Shops” program by 2025, and has pledged $1 billion to small businesses in the market. Amazon has been hit with serious pushback from both antitrust bodies and retail trade organizations for its business practices, which came under fire in a recent Reuters report. Flipkart hasn’t come out unscathed either, with both companies now under investigation by the Competition Commission of India for potential anticompetitive behavior.

Nevertheless, the focus on small businesses continued to be a recurring theme throughout Flipkart’s funding announcement.

“At Flipkart, we are committed to transforming the consumer internet ecosystem in India and providing consumers access and value. This investment by leading global investors reflects the promise of digital commerce in India and their belief in Flipkart’s capabilities to maximize this potential for all stakeholders,” said Kalyan Krishnamurthy, CEO of Flipkart Group, in a statement. “As we serve our consumers, we will focus on accelerating growth for millions of small and medium Indian businesses, including kiranas. We will continue to invest in new categories and leverage made-in-India technology to transform consumer experiences and develop a world-class supply chain.”

More than 300,000 registered sellers from across India are on Flipkart’s marketplace, and 60 percent are from Tier 2 cities or below.

Lydia Jett, a partner at SoftBank Investment Advisers, one of Flipkart’s main investors, called the opportunity to meet young consumer demand for high-quality, low price online products “critical to India’s quest for the ‘$5 trillion economy.’”

Flipkart has more than 350 million registered users from across the country, with top investments coming in fashion, travel and grocery that reflect India’s maturing digital commerce industry. Myntra, the group’s fashion entity, is among the leaders in the category, with a wide consumer base offering the most comprehensive and latest collections in fashion.

Flipkart’s logistics and supply chain arm, Ekart, employs more than 100,000 people and makes deliveries to more than 90 percent of the addressable pin-codes in India, which, coupled with strategic warehouse infrastructure investments, is one of the group’s core strengths.

In April, Flipkart partnered with logistics giant Adani Group to build a 534,000-square-foot warehouse near Mumbai and a data center in Chennai. The deal is expected to help Walmart gain a bigger fulfillment presence in the country via Flipkart. According to Adani, the facility can hold up to 10 million units of inventory and is set to become operational in 2022.

“Flipkart is a great business whose growth and potential mirrors that of India as a whole—that’s why we invested in 2018 and why we continue to invest today,” said Judith McKenna, president and CEO, Walmart International, in a statement. “Kalyan and the team have put the Indian customer at the center of everything and they have continued to innovate in the categories and services Indian customers want most, creating new jobs and growth opportunities for Indian entrepreneurs and small businesses alongside them. The quality of the investor group and valuation announced today is further confirmation of global confidence in Flipkart and its mission to transform commerce in India.”

Venturing into the social commerce space, Flipkart recently announced the launch of Shopsy, which will encourage local entrepreneurship. The group is also a majority shareholder in PhonePe, an Indian payments app with more than 300 million users, facilitating over 1 billion transactions per month, 80 percent of which occur in Tier 2 and 3 cities and beyond. Flipkart partially spun off PhonePe as a separate entity in December last year.

Additional investments in the round came from sovereign funds DisruptAD, Qatar Investment Authority, Khazanah Nasional Berhad, and marquee investors Tencent, Willoughby Capital, Antara Capital, Franklin Templeton and Tiger Global.

Walmart bought a near-77 percent stake in Flipkart in 2018 for $16 billion, acquiring a large stake held by SoftBank’s original Vision Fund. As part of Flipkart’s move to consolidate Walmart India and its new B2B wholesale business, the e-commerce giant bought all 28 of Walmart’s warehouse club stores in the country last year.