Flipkart’s wholesale arm gets $304 mn in fresh capital from parent

Flipkart’s wholesale arm gets $304 mn in fresh capital from parent
Photo Credit: Photo Credit: Reuters
12 Dec, 2018

Flipkart India Pvt. Ltd, the wholesale arm of Walmart-owned e-commerce giant Flipkart, has received a fresh capital infusion of $304 million (around Rs 2,190 crore) from its Singapore-based parent.

The unit has been allotted 7.45 lakh equity shares at a premium of Rs 29,399 per share, show filings with the Registrar of Companies.

The wholesale arm sells all types of goods and products including electronics, electrical goods, personal products, healthcare products, home and business products, entertainment products, toys and more on a business-to-business (B2B) basis to its sellers.

The fresh infusion is expected to further intensify the battle in India’s online retail market where two of the world’s largest companies – Walmart and Amazon – are in a tussle to establish clear market leadership.

The latest development comes just a week after TechCircle reported that Amazon Seller Services Pvt. Ltd, the Indian division of US-based e-tailer Amazon, had received fresh capital worth Rs 2,200 crore ($311.32 million) from its parent firm.

The transaction valued Amazon Seller Services Pvt. Ltd at Rs 2,788.92 crore ($395 million at current exchange rates), TechCircle estimates show. 

This was the fourth such investment that Amazon has made this year. It has injected capital worth Rs 9,450 crore into India in 2018. Prior to its latest infusion, Amazon India received Rs 2,700 crore in August, Rs 2,600 crore in May and Rs 1,950 crore in January.

According to a report in The Economic Times, with the latest funding round, Amazon's India business has received total funding worth Rs 27,290 crore (around $3.9 billion) of the promised $5 billion that chief executive Jeff Bezos had committed in 2016.

Amazon entered the Indian market in 2013 while its US rival Walmart arrived with the $16 billion acquisition of Flipkart earlier this year, extending its omnichannel cash-and-carry play to a full-blown online business.

Walmart had made its first major fund infusion into its newly-acquired entity just weeks ahead of the festive season. In September, Flipkart Marketplace Pvt. Ltd (Singapore) invested $487 million (Rs 3,463 crore) in Flipkart Internet Pvt. Ltd, which operates the marketplace. 

Flipkart’s wholesale unit recorded a significantly wider loss in 2017-18 than the year before, according to the company’s financials filed with the Ministry of Corporate Affairs.

The standalone net loss of Flipkart India Pvt. Ltd grew eight-fold to Rs 2,064.8 crore from Rs 244.7 crore as costs jumped. The unit’s standalone net revenue jumped 40% to Rs 21,438.65 crore from Rs 15,264.42 crore.

The results pertain to Flipkart’s performance prior to being acquired by Walmart.

Meanwhile, Amazon Seller Services Pvt. Ltd fell deeper into a loss for the financial year through March 2018 although its revenue rose rapidly. The company’s standalone net loss widened to Rs 6,287.2 crore for 2017-18 from Rs 4,830.6 crore the year before, according to filings with the Registrar of Companies.

Revenue from operations grew 58% to Rs 4,928.4 crore. Loss widened as the company continued to splurge in order to compete with Flipkart. The total expenditure of Amazon’s biggest India arm stood at Rs 11,305 crore in 2017-18, up from Rs 8,087.2 crore the year before.