India's Flipkart completes $3.6b funding round
Walmart-controlled Flipkart, one of India’s largest e-commerce players, has raised $3.6 billion at a valuation of $37.6 billion with significant private equity support.
GIC, Canada Pension Plan Investment Board (CPPIB), SoftBank Vision Fund 2, and Walmart led the round. They were joined by Willoughby Capital, Antara Capital, Tencent Holdings, Franklin Templeton, and Tiger Global Management, as well as sovereign funds DisruptAD, Qatar Investment Authority, and Khazanah Nasional.
Walmart described the investment as a reflection of strong global investor confidence in digital commerce in India, which has continued to grow in the past year with pandemic-related concerns driving consumers to seek convenience and safety in shopping.
The US retail giant acquired a 77% stake in Flipkart in 2016 for $16 billion and reinvested as recently as last year, when it led a $1.2 billion round featuring Tencent and Tiger Global among others. That round valued the company at $24.9 billion.
Flipkart will use the fresh capital to invest in people, technology, supply chain, and infrastructure, with a focus on plugging into India’s informal ecosystem of micro-businesses. The plan involves helping small fashion industry businesses explore untapped opportunities in technology, expanding grocery and last-mile delivery programs, and working with neighborhood shops – known as kiranas – to help them digitize and grow.
The strategy appears to extend a theme of large corporates seeking to create comprehensive infrastructural systems in Indian retail, where their services and branding are ubiquitous. Reliance Industries raised about $26 billion last year for a plan in this vein, combining the resources of its Jio Platforms, JioMart and Reliance Retail affiliates. In March, Amazon formed a $250 million fund for a similar agenda.
Corporates and financial investors have struggled to consolidate India’s kirana sector, however, due to a mix of practical scaling challenges and cultural factors. Hyperlocal shop owners, which typically prefer the control and flexibility of an independent style, have thrived since the onset of COVID-19, giving them less incentive to modernize operations. There are estimated to be as many as 50 million kiranas nationwide.
Flipkart has more than 350 million registered users and more than 300,000 registered sellers on its platform, with 60% of the sellers in tier-two or smaller cities. The company claims to work with more than 1.6 billion kiranas through its wholesale business and its last-mile delivery program. Samarth, an internal program to support small businesses, underserved communities, and artisans, is billed as having more than 750,000 beneficiaries.
Flipkart focuses on categories that it believes reflect the maturing of the Indian e-commerce space, including fashion, travel, and grocery. Logistics and supply chain services are handled by the company’s Ekart business, which makes deliveries to more than 90% of the addressable pin-codes in India. Other interests include PhonePE, a leading local payments app with 300 million users.
“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,” Judith McKenna, president and CEO of Walmart International, said in a statement.
“[CEO Kalyan Krishnamurthy] 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.”
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