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Exclusive: Ahead of sale season, Flipkart’s B2B arm raises $156 mn loan

18 September, 2017

Flipkart India Pvt. Ltd, the wholesale cash-and-carry arm of e-tailer Flipkart and its largest unit, has received a working capital credit of Rs 1,000 crore ($156.2 million) from Axis Bank, documents filed with the Ministry of Corporate Affairs show.

The company executed a deed agreement to this effect on 28 August.

This facility is in addition to the existing credit line of Rs 375 crore that Flipkart already has with the bank.

India’s largest e-commerce firm had previously raised Rs 650 crore from Kotak Mahindra Bank, a loan that was eventually increased to Rs 820 crore. It had also secured a Rs 300 crore credit line from HDFC Bank, which was subsequently upped to Rs 453 crore.

While taking loans is not unusual in the corporate space, the extent of a company’s reliance on working capital credit is an indicator of its cash flow position and the business’ recovery cycle.

E-mail queries to Flipkart seeking more information on the loan did not elicit an immediate response.

The financing comes with the fourth edition of Flipkart’s flagship sales event, Big Billion Days, just around the corner. Traditionally, the e-tailer records its best sales volumes during this and subsequent sale events, which extend until Dhanteras and Diwali.

Industry experts feel Flipkart opted for the credit top-up to equip itself for the festive sale season. While there is a lot of action on the consumer side, it is crucial that the business-to-business (B2B) side of things also works seamlessly during such events.

“It is important to hold a sale and be able to ship and deliver efficiently during the festive season. Delivery time is paramount and plays a crucial role in consumer experience,” said Anup Jain, managing partner at consumer and retail consulting firm Redback Advisory Services.

While the company could use the loan for multiple purposes including extending credit to sellers, boosting logistics and ramping up delivery, experts feel the primary expenditure will be on stocking up inventory.

“Flipkart possibly wants a significant share of the sales to come from its own sellers. Hence, it is more likely to use the facility to stock up the inventory. Besides, the sellers might also need significant working capital on short notice during the festive sales season,” said Satish Meena, senior forecast analyst at market research firm Forrester.

Flipkart and rival Amazon have shown signs of moving away from the discounting-led gross merchandise value approach in favour of consumer experience. However, armed with fresh funding from Japan’s SoftBank, Flipkart is likely to indulge in the discount game again during the sale event.

Other Indian e-commerce majors, including Paytm Mall and ShopClues, are also likely to go all guns blazing during the festive sale season. Deep discounts and cashbacks, besides a large array of products, will be on offer.

According to a Redseer study, India’s e-commerce companies had generated gross sales of $2.2 billion (Rs 14,000 crore) during the 2016 festive season while their estimated marketing budget was Rs 500 crore, down from a whopping Rs 2,000 crore spent on ads by Flipkart, Amazon and Snapdeal in 2015.

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Exclusive: Ahead of sale season, Flipkart’s B2B arm raises $156 mn loan

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