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Flipkart pours $257.3 mn into logistics arm eKart
Photo Credit: Reuters

Homegrown e-commerce major Flipkart has infused another Rs 1,632.81 crore ($257.3 million) into its logistics arm eKart, which is operated by Instakart Services Pvt. Ltd, filings with the Registrar of Companies show.

Flipkart raised this sum in multiple tranches between October and November last year. In November, it raised the bulk of this sum in two tranches, amounting to Rs 1,309.20 crore ($206.20 million), while the remaining Rs 327.41 crore ($ 51.56 million) was raised in October, the filings revealed.

E-mail queries sent to Flipkart did not immediately elicit a response at the time of publishing this report.

According to the filings, eKart raised this sum by allocating equity shares at Rs 62.51 apiece to its Singapore-based group firm Klick2Shop Logistics International Pvt. Ltd.

The last time eKart received funds was in September 2017, when Flipkart infused $147 million into the unit .

Klick2shop is the controlling entity of Instakart and is most likely a subsidiary of Flipkart Pvt. Ltd, the Singapore-based flagship parent of the online retailer.

Industry experts said that Flipkart will continue to pump in large amounts into its logistics arm going forward. In October last year, VCCircle had reported that eKart earmarked Rs 3,000 crore ($460.7 million) in the form of a strategic reserve pool for investments, acquisitions, and inter-corporate loans.

On Monday, Flipkart chief executive Kalyan Krishnamurthy told The Economic Times that the company’s new focus metric would be increasing its monthly active users and this is expected to grow over two-fold in 2018.

Krishnamurthy also said that Flipkart will build its grocery initiative, Supermart, with the right unit economics and shaping customer buying behaviour, thereby focusing on profitability. This would mean that Flipkart will have to significantly scale-up and expand its hyperlocal delivery infrastructure.

Flipkart is already developing cold chain and back end infrastructure to ramp up its e-grocery commerce capability, a person in the know who wished to remain anonymous told VCCircle earlier.

“Flipkart has to put in significant timely investments into its logistics arm to achieve this as faster shipping and delivery time is crucial to these targets. This will also prove to be a differentiator when Flipkart launches its own loyalty programme, along the lines of Amazon Prime,” said Satish Meena, senior forecast analyst at research firm Forrester Research.

Meena added that a lot of investment this year will go into its-grocery business, where achieving an impressive fill rate will be the eventual goal. In order to continue its stronghold in these categories, especially fashion, Flipkart will have to continue to pump in significant investments.

Besides, a lot of investment is also expected to go into ramping up its warehousing capability as large appliances, along with fashion, has become another focus category in the wake of the company’s focus on private labels.

Krishnamurthy told ET that both Flipkart and Myntra have a 75-80% market share in the online branded and unbranded, home, mobiles and appliances categories, which account for over 80% of e-commerce in India.

In October last year, Flipkart launched MarQ, its private label for large appliances and has already started selling its own line of microwaves, washing machines and TVs on its platform. It is also expected to launch air-conditioners as well.

Flipkart’s US-based rival Amazon has also been significantly ramping up its investments and warehousing capability. In August 2017, the firm’s logistics arm, Amazon Transportation Services Pvt. Ltd, received $63 million in funding.

To keep competition at bay, Amazon is also expected to bring in significant investments into its logistics infrastructure. At last count, by various media accounts, Amazon invested in expanding its network of fulfilment centres to 41 in 13 states across India with a combined storage space of close to 13 million cubic feet. Last month, it opened its largest fulfilment centre in Telangana, with 400,000-sq-feet area and about 2.1 million cubic feet of storage space.

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