Flipkart Group has raised $1.2 billion in the fresh round of investment led by Walmart. The injection of new funds has valued the company worth $24.9 billion, up by 19% compared to the valuation it attained when acquired by Walmart two years ago.
The investment would be released in two tranches during the ongoing financial year, confirms Walmart. The existing investors of Flipkart, Tiger Global, Tencent and Accel Partners also participated in the round sensing a great need to have a bigger war chest to compete with hyper-aggressive Reliance Jio and Amazon.
The market equation is bound to change in the next one year as Reliance Jio is gearing up to capture a sizeable share of the eCommerce market by leveraging its telecom reach in India. The company has got few of the world’s largest tech behemoth by its side and with over Rs 152,055 crore investment so far the Jio has emerged as the most disrupting tech company in India.
On the other hand, in January this year, the global eCommerce behemoth Amazon also committed to investing $1 billion in its Indian operations to strengthen its market presence.
Undoubtedly, the market has turned out to become a three-horse race and each one of these need to burn a sizeable amount in marketing and consumer acquisition in the months to come.
The recent $1.2 billion is the largest investment Flipkart has attracted since Walmart acquired a controlling stake of 80% at a valuation of $21 billion in 2018.
“Today, we lead in electronics and fashion and are rapidly accelerating share in other general merchandise categories and grocery…We will continue innovating to bring the next 200 million Indian shoppers online,” said Kalyan Krishnamurthy, CEO of Flipkart Group.
The nationwide outbreak of Covid-19 has made Flipkart revisit its grocery business strategy. As consumers have turned towards essentials more than general categories like electronics and apparel during such an unprecedented situation, Flipkart now wants to enjoy the dominant position in this category. For the last 4 months, Flipkart has been aggressively promoting its grocery offerings to eat into the market share of grocery and home essentials delivery startups, likes of BigBasket.
The grocery and daily essentials delivery business, however, is cash intensive game and startups operating in this category require to have an uninterrupted supply of cash to burn in marketing and market acquisition. With Jio joining the category, the competition will become more intense and considering the backup Jio has got – both financially and technically – Flipkart also need a bigger war chest to have stronger footprints in the market.
Flipkart is quite optimistic about its position and offerings. The company is banking upon its existing customer base and merchant relationship. In FY’20 the poster boy of Indian ecommerce revolution reported 45% increase in its active user base and 30% growth in transactions per customer.
Walmart, on the other hand, seems quite confident about the Flipkart success in India. Quite recently, the company’s eCommerce arm in the US reported a whopping 74% jump in its online sales during the first quarter of the year.
It would be interesting to see what strategy Flipkart employs to counter both Amazon and Jio Platforms. Whatever be the situation, one thing is certain – it’s the consumer who would be winning ultimately due to the price war these three giants are indulged into.
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