India’s largest consumer e-commerce platform Flipkart.com saw a sharp rise in sales last year. Its total income or gross merchandise value rose 178 per cent or more than 2.7x to Rs 1,345 crore for the year ended March 31, 2013 against around Rs 484 crore the previous year. What’s more, its net profit actually grew 2.5x to Rs 2 crore. Yes, you read that right, ‘net profit’.
But before you jump to conclusions please note, Flipkart as we know it is more than just Flipkart.com, which is simply an ecommerce site and has become an online marketplace of late.
WS Retail Services Pvt Ltd, which runs Flipkart.com under licence from another entity of the Flipkart group, has been making profits for the last three years. It is the front end of Flipkart whose shareholders include Rajiv Kuchhal, an IT executive and a private investor, besides few employees of Flipkart as a group. This structure ensures it is not counted as a part of Flipkart group and therefore Flipkart as a venture is compliant with the ban on FDI in online retail.
Back to our story, while the growth has been impressive for Flipkart.com, it hides a sharp deceleration in growth rate compared with the previous fiscal when it grew around 10x. This is nothing unusual, as a firm grows in size its growth rate decelerates since the base grows large. So, last year its growth pace slowed down by three-fourths.
What’s heartening for Flipkart fans is that even if the firm loses one-fourth of its growth momentum year on year starting this fiscal (which means for the year ending March 31, 2014) it will be able to hit the target of $1 billion in sales by FY15, VCCircle calculations show.
Flipkart is poised to cross Rs 3,000 crore in sales this financial year and may double itself again the year thereafter to hit $1 billion in gross merchandise value, even as the rupee value of $1 billion is now more than what was the case when Sachin Bansal set the target around two years ago.
Raise the stakes even higher with 30 per cent decline in growth rate (mind you growth rate not growth) from now on, then too Flipkart will cross its magical sales target during 2015 calendar year. However, if its growth decelerates more than 40 per cent then it may miss its target.
While Flipkart.com is growing fast and is even profitable, the flagship Indian company of the group (whose holding firm with investments from Naspers and other VC investors is now in Singapore), is in losses, as expected.
Flipkart India Pvt Ltd saw its net loss rise over three times to Rs 192 crore from Rs 61 crore last year and the loss carried to the balance sheet rose to Rs 281.7 crore from Rs 110 crore. Flipkart India had a couple of years ago acquired all the assets of Flipkart Online Services and is now the key operational unit of the group as a wholesale cash and carry firm. Flipkart Online, which previously counted foreign investors, could see a voluntary liquidation soon.
What’s good news, however, is that the rise in losses is less than growth in sales. Flipkart India handles the backend of the e-com venture and is a key supplier to WS Retail which then resells as an online retailer.
In April this year, the firm launched its marketplace and integrated it with its existing e-commerce platform to enable third-party sellers to list and sell their products on its website and sell directly to consumers. This should boost overall value of sales transaction on Flipkart.com as products sold by other vendors (and not just WS Retail which sources from Flipkart India) will go up.
In October this year, Flipkart raised an additional $160 million (Rs 990 crore) in the fifth round of funding started in July this year, from new investors, including Belgium-based Sofina, US-based Morgan Stanley Investment Management, Dragoneer Investment Group and Vulcan Capital (founded by Microsoft co-founder Paul Allen), along with participation from existing investor Tiger Global.
Flipkart Pvt Ltd, a Singapore-based holding firm, had previously raised $200 million from existing investors Naspers Group, Accel Partners, ICONIQ Capital, and Tiger Global in the first tranche of the group’s fifth round of external funding. This was just five months ago and with the second phase, the total capital raised from the fifth round reaches $360 million, which is the single-largest amount to be raised by any Indian internet business ever and valued the firm at $1.6 billion.
This fresh funding took the total funding for Flipkart so far to over $540 million and came 18 months after it had raised what was reportedly a $150 million Series D round led by the Johannesburg-based Naspers in a deal which valued it at $1 billion. Flipkart had previously raised three rounds of institutional funding from Tiger Global and Accel Partners besides angel funding.
(Edited by Joby Puthuparampil Johnson)