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Flipkart Set To Raise $150M From General Atlantic At $1B Valuation 

Deal biggest ever in an Indian internet firm.

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.”

This is the fourth round of funding for Flipkart, which has recently raised $20 million in its series C round of funding from New York-based Tiger Global Management LLC. It had earlier raised seed funding from Accel Partners.

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 is playing catch-up with Indian firms, raising money at big valuations. In another deal announced today, Jasper Innovative Marketing Solutions, which owns the popular group buying portal Snapdeal.com, has raised $40 million from Bessemer Venture Partners, NEA Indo-US Ventures and Nexus Venture Partners at a valuation of Rs 1,000 crore.

There are a host of other e-commerce websites which have raised money in the recent past, such as LetsBuy.com, which has recently raised $6 million from Helion, Accel and Tiger Global.

With moneybags back for funding, these Internet ventures and entrepreneurs are thinking big once more and analysts 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 is creating a customer-delight experience.

Comments

Sn
good luck to general atlantic ! it's soon becoming a fool finding bigger fool investment theme...$ 1 bn valuation for few cr rupees turnover company...now this is perfect recipe fr e-commerce bubble....
SAS
This is not right. A company being valued 50 times its revenues is plain stupid. I sincerely hope somebody brings sanity into the system. Flipkart looks like a scapegoat for the investor community to do their insider dealings. I bet the promoters hardly have a say in this. GA has not closed a deal in the last 4 years and now this one. Sad!
iimb
I buy my stake at 5 Rs and spend rest of my time ensuring i sell for at least 10 or 100 times more. That's my focus - forget what the customers get, or even if I am profitable or running a single margin business. Hype my friend creates buzz and buzz creates valuation. we are headed for a great ride.
Rajan
This is a perfect example of another dot-com bubble in the making. More than 200 Million USD has been poured into the sector this year alone. VC's are solely responsible for this to create all the hype and play with LP's money for quick & fancy returns. Reality will bite someday when Flipkart goes for an IPO when there would be no public takers for such a speculated company.
Chirag Jobanputra
Great going Flipkart, I do not see this speculating, they have strong business model, great customer service and a big playground to play. Is there any other company in India growing as fast as flipkart, the answer is 'None'.
Joker
Hmm, do I see a green tinge of envy in the comments by IIM folks about a company started by plain IIT grads? Mark Zuckerberg was also no MBA either -look at him and well, go have fun trying to start your own company.
Chirag
1 billion? What is wrong with everyone? On an interesting note see this. http://traffic.alexa.com/graph?&w=400&h=220&o=f&c=1&y=t&b=ffffff&n=666666&r=5y&u=rediff.com&
Siddharth
The 1 billion valuation will not seem stupid after 4-5 years. These guys have virtually no competition, and to create a supply chain (which is the biggest bottle neck here) any competitor will have to struggle a lot. Frankly, Crossword could have tried to do this, but they couldn't take off and remain a side business.
Pankaj
I am scratching my head. The largest airline in India, Jet Airways with 97 aircraft has a market cap of $850 million and of all the 5000 listed companies in India only about 150-200 have a market cap of $1 billion or more.....
sachin
what do you guys say about starting a online shopping portal, how an new entrant compete with the existing player.
Varma
Flipkart's revenues are less than $5 M. Laymen confuse their turnover or what is known as gross merchandise value as revenues. In retail or ecommerce, you should actually count only their net revenues which is at best only 10% of the turnover. Using this as a basis, the valuation multiple is 200 times revenues. The same is the case with the news on Snapdeal earlier. If this is not a bubble, i don't know what else is.
SL
At the outset, this does look like a stretched valuation. However, as always, the devil is(may be) in the details. Unless the term sheet of GA is seen, its difficult to take a call since no one knows if this is a single tranche investment, milestone based or has some other riders. However, on the business model front, I have reservation on sustainability. This deal may be betting more on the customer database and cross-selling opportunities rather than plain Flipkart revenues. Only time will tell.
SN
deals like these make the LPs in developed nations stand up n say Indian companies are very expensive n rush to China where valuations are reasonable enough to give LPs good returns...what is so unique abt supply chain management of flipkart tht warrants USD 1 bn price..expensive deals turn off LPs in a very big way something which promoters dont understand....curious to follow the fortunes of exit of this deal....CROSSWORD never tried to make onlinesales as core strength and its supply chain is robust....every investor in sees future makemytrip in their investment and fool NASDAQ....BSE / NSE will nt even give a glance on such companies...
FK Rocks
Dont knw wht the fuss is all about. Facebook is valued at 100 billion. Its just not about today alone its about what the company can achive over a period of time. All you IIMB straight coats can learn a lot from FK, its not all hit and run. The 3G spectrum has been auctioned for 50K Crores, the way companies can get a ROI is by investing on e-commerce. By 2015 india's online penetration is set to cross the population of the US, think this is an investment for the future. PS - FK ppl if you reading this comment, dont sell the bussiness to Amazon tell Amazon how things are done here!! All the best!
OWL WATCH
@Varma - Absolutely right. Few have understood that FK is a Rs. 20-25 Crs LOSS making company; and the company is getting valued at over 200times revenue. The important part to note is that - assuming the @150mn is a fully primary, bullet investment round - in the current year FK will have greater earnings from other income than business income! FK's stated approach of building its own delivery & cash-collect workforce is an interesting twist to an "e-commerce" model. In principal it follows the local kirana store approach of free home delivery/cash-pickup model. Will this be a pan-India scalable model. We will have to wait and watch. 150mn will go a long way in building a DSA model. Will then FK option of acting as the courier / delivery network for financial services sector too - and can become an alternate source of revenue. Nothing "e" about their business! 360buy in China is (over)valued at $10bn at a time when they have 'sales' of about USD 4bn. Like-to-like for a 50mn projected sales FK should have been (over) valued atbest at $100-125Mn. Anyone know if the founders cashed out in this round?
MM
I don't belive it :)
sachiv mehta
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

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