Flipkart Online Services Pvt Ltd, which runs the e-commerce site Flipkart.com, is close to raising $150 million in a PE round of funding from the private equity firm General Atlantic Partners, in the biggest deal ever in an Indian Internet company that values Flipkart at $1 billion (Rs 4,400 crore), at least two sources familiar with the development told VCCircle.
With this deal, India joins mature markets like the USA and China, with billion-dollar valued Internet firms. It also shows how General Atlantic, which has $17 billion assets under management, is aggressively pursuing Internet companies. Earlier this year, it has reportedly bought 0.1 per cent stake in Facebook in a deal that valued the social networking website at $65 billion.
In an e-mail response, Pat Hedley, managing director (Corporate Affairs), General Atlantic said, “It is our company policy not to comment on investment opportunities that we may or may not be considering." In an email response, Sachin Bansal, CEO, Flipkart said, "Any discussion about funding is speculative. Being a privately held company, we would not like to comment on this."
Interestingly, Flipkart had recently raised $20 million from private equity firm Tiger Global, which was estimated to be at $250 million valuation. Prior to this in 2009, Tiger Global had invested $10 million in Flipkart. The seed capital was provided by early stage fund Accel Partrners whose investment in Flipkart is likely to become one of the best returns in the Indian venture capital industry, sources said.
The valuations of e-commerce companies who have established market leadership position have been going through the roof. For instance, Indian daily deals site Snapdeal.com parent Jasper Infotech Pvt Ltd announced today an investment of $40 million rom Bessemer Venture Parters and existing investors Nexus Venture Partners and NEAIndoUS Ventures. This deal was also estimated to be done around $250 million valuation.
Flipkart was founded in 2007 in Bangalore as an online book retailer and has since diversified into a generic e-commerce site, selling CDs/DVDs of music, movies, games and software, as well mobile phones and electronics. Touted as one of the hottest Internet companies, Flipkart is in a high-growth phase. “The company is selling goods worth $6 million per month,” said one of the sources close to the development.
As of June, 2011, Flipkart had 1,500 employees on board and offices in Bangalore, Mumbai, Delhi, Chennai and Kolkata. In December last year, the company acquired social book discovery tool WeRead from Lulu, a US-based on-demand publishing firm.
Private equity investors are essentially trying to replicate success that they have met with venture businesses in China, among the few other emerging economies. In the past 10 years, China has created giant e-commerce companies like 360buy, TaoBao and Tencent. And one of the main reasons that these companies came about was – they were consistently backed by private investors.
Indian e-commerce space has been hotting up for the last one year. Many e-commerce companies have raised money in the recent past such as LetsBuy.com, which recently raised $6 million from Helion, Accel and Tiger Global and online jewellery retailer Caratlane raising capital from Tiger Global.
With moneybags back for funding, these Internet ventures and entrepreneurs are thinking big once more whileanalysts are questioning whether a bubble is in the making.
However, there are some fundamental reasons why e-commerce is set to take off in India, which explains why the surge is bigger and better than before.
According to experts, the next decade will bring massive growth in the Internet sector in India, supported by highly favourable demographics, growing Internet-broadband penetration, launch of 3G network, growing middle class-income levels, noticeable pick-up in tech-gadget and mobile culture, and surge in home-grown Internet start-ups. Also, there is a thinking that about 20 per cent of retail sales will happen online in India as it is more cost-efficient and organised retail has not really taken off in the country.
While there are macro favourables in place, e-commerce, like most other businesses, boils down to an execution play and in creating a delightful experience for customer.
July 31, 2011
FK's present T/O is around 100 Crores. Assuming there optimistic NP of 10% now, they make 10 Cr i.e. 2.5 Mn USD. Estimating more agreesive and over optimistc 100% compounding growth for next 5 Years in sales and NO, they should reach 80 Mn USD in the 5th year. Cummulative should be at 155 Mn USD.
A Billion $ valuation now alone will earn a cumulative interest @ just 5% will earn 276 Mn USD. Almost double the size of their cumulative over optimistic earnings.
there is no guarantee that other healthy competitors like TV18 or BIG (ADA) or Times will enter in this apparantely lucrative business and puncture the above assumptions. Also, the economic conditions also play dominating role in arithematic growth I assumed above.
So how can this 1 bn $ valuation be justified ?
well, the VCs are nothing but the toutes for the stupid and greedy foreign investors and entire holding of these Vcs will be landed into this stupids' kitty for the rest of their life and will bear the same position they experience in case of Amazon's share, world's once costliest company. Well above opinion is with due respect to Flipkart which offers excellent buying experience and unmatched service.
Sachiv