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Saturday 4 July 2020

India’s best known startup story: The journey of Flipkart

The growth of the sector was comfortably in sync with the meteoric rise of Flipkart

New Delhi: From selling books online to striking a jaw-dropping $20.8 billion valuation by the world’s largest retailer WalMart, all within 11 years, Flipkart has given India its big startup success story the one which is likely to be quoted by entrepreneurs for years to come.

Flipkart, a company which started with a mere investment of Rs. 4, 00,000 to develop its website, has undoubtedly grown up to be one of the biggest e-commerce players in the Indian peninsula.

Flipkart was founded by Sachin Bansal and Binny Bansal, alumni of Indian Institute of Technology Delhi, in October 2007. In its initial phase of operation, Flipkart was registered as Flipkart Online Services Pvt. Ltd and sold only books.

As more and more consumers turned to Flipkart for shopping, investors turned to Flipkart to support the company’s future strategy.

The idea was simple. Consumers could shop online and get books delivered to their doorstep. Flipkart registered 20 shipments in the year of its debut.
Flipkart hit GVM of $1 billion in March 2014. GVM is the value of good sold or gross merchandise value and is calculated on monthly average sales. Flipkart now employs more than 33,000 people.

[pullquote]One complementary effect this deal may have is a strong positive push towards Japanese investment in Indian companies. Till now, most the large ticket Japanese investments in India had underperformed or had got entangled in various market related or company specific issues. This had led to a cautious approach among many Japanese conglomerates and investors while evaluating potential investment opportunities in the Indian market. However, with the Walmart-Flipkart deal, Softbank’s $2.5 billion investment in Flipkart has now delivered ~60% returns in 9 months. This success story can push more Japanese conglomerates to seriously evaluate and invest in Indian opportunities.

— Manoj Patkar, Executive Director & Partner, 7i Advisors LLP[/pullquote]

In October and November 2011, Flipkart acquired the website Mime360.com and rights to the digital catalogue of Chakpak.com. Later, in February 2012, the company revealed its new Flyte Digital Music Store. Flyte, a legal music download service in the vein of iTunes and Amazon.com, offered DRM-free MP3 downloads. But it was shut down on 17 June 2013 as paid song downloads did not get popular in India due to the advent of free music streaming sites.

In 2015, Flipkart bought a minority stake in navigation and route optimization startup MapmyIndia to help improve its delivery using Map my India assets.

Today, Indian e-commerce industry is already close to $30 billion in size and analysts expect this to zoom to $200 billion by 2026.

The growth of the sector was comfortably in sync with the meteoric rise of Flipkart.
Initially, they had spent ₹400,000 ($6,100) only for making the website to set up the business. Flipkart has later raised funding from venture capital funds Accel India ($1 million in 2009) and Tiger Global ($10 million in 2010 and $20 million in June 2011). On 24 August 2012, Flipkart announced the completion of its 4th round of $150 million funding from MIH (part of Naspers Group) and ICONIQ Capital. The company announced, on 10 July 2013, that it has raised an additional $200 million from existing investors including Tiger Global, Naspers, Accel Partners and Iconiq Capital.

Flipkart’s reported sales were ₹40 million ($610,000) in FY 2008–2009, ₹200 million ($3.1 million) in FY 2009–2010[46] and ₹750 million (US$11 million) for FY 2010–2011. In FY 2011–2012, Flipkart is set to cross the ₹5 billion (US$77 million) mark as Internet usage in the country increases and people get accustomed to making purchases online. Flipkart projects its sales to reach ₹10 billion (US$150 million) by the year 2014. On average, Flipkart sells nearly 10 products per minute and is aiming at generating a revenue of ₹50 billion ($770 million) by 2015.

On November 2012, Flipkart became one of the companies being probed for alleged violations of FDI regulations of the Foreign Exchange Management Act, 1999.

After its 2014 Big Billion Sale, Flipkart carried out a second Big Billion Sale. Where it is reported that they saw a business turnover of $300 million in gross merchandise volume.

Flipkart reported a loss of ₹2.81 billion ($43 million) for the FY 2012–13. In July 2013, Flipkart raised $160 million from private equity investors.

In October 2013, it was reported that Flipkart had raised an additional $160 million from new investors Dragoneer Investment Group, Morgan Stanley Wealth Management, Sofina SA and Vulcan Inc. with participation from existing investor Tiger Global.

On 26 May 2014, Flipkart announced that it had raised $210 million from Yuri Milner’s DST Global and its existing investors Tiger Global, Naspers and Iconiq Capital.

In early July 2014, it was also highly speculated that Flipkart was in negotiations to raise at least $500 million, for a likely listing in the US for 2016.

On 29 July 2014, Flipkart announced that it raised $1 billion from Tiger Global Management LLC, Accel Partners, and Morgan Stanley Investment Management and a new investor Singapore sovereign-wealth fund GIC.

On 6 October 2014, Flipkart sold products worth ₹6.5 billion ($100 million) in 10 hours in a special one-day event – “The Big Billion Day”, claiming they had created e-commerce history, but their hard-won reputation for good customer service suffered because of technical problems, and angry reactions on social media from buyers disappointed with the pricing and availability of products. It claimed to sell a whopping 500,000 mobile handsets, 500,000 clothes and shoes and 25,000 television sets within hours of opening its discounted sale at 8 AM. In December 2014, after it received $700 million from another funding, Flipkart had a market cap of $11 billion. In May 2015 Flipkart has raised $550 million from some of its existing investors, in a deal that raised the valuation of the privately held Indian startup to about $15 billion.

On 20 December 2014, Flipkart announced filing application with Singapore-based companies’ regulator ACRA to become a public company after raising $700 million for long-term strategic investments in India following which its number of investors exceeded 50. The $700 million fund raised by Flipkart added new investors—Baillie Gifford, Greenoaks Capital, Steadview Capital, T. Rowe Price Associates and Qatar Investment Authority—on company’s board. Its existing investors DST Global, GIC, ICONIQ Capital and Tiger Global also participated in this latest financing round.

By August 2015, after raising US$700 million, Flipkart had already raised a total of $3 billion, over 12 rounds and 16 investors.

In what has been the company’s latest round of funding, Flipkart announced on April 10, 2017, that it has secured a fresh $1.4 billion at a valuation of $11.6 billion from the likes of eBay, Microsoft and Tencent. This fundraising round also witnessed participation from existing Flipkart backers — Tiger Global, Naspers, Accel and DST Global.

On 10 August 2017, Softbank Vision Fund invested $2.5 billion in Flipkart.

On 4 May 2018, it was reported that the U.S. retailer WalMart had won a bidding war with Amazon.com to acquire a 75% majority stake in Flipkart for US$15 billion. On 9 May 2018, WalMart officially announced its intent to acquire a 77% controlling stake in Flipkart for $16 billion, subject to regulatory approval. Following the proposed purchase, Flipkart founder Sachin Bansal will leave the company, while the remaining management will report to Marc Lore, CEO of WalMart eCommerce U.S.; WalMart president Doug McMillon cited the “attractiveness” of the market, explaining that their purchase “is an opportunity to partner with the company that is leading transformation of eCommerce in the market”.

From a modest two-bedroom apartment in Koramangala, the Bengaluru-headquarted company now has multiple offices across the country. A bulk of its operations are run out of a plush campus in the city that is spread over 1 lakh sq ft and houses 6,800 employees.

It was almost two years after starting the business that Flipkart got its first full-time employee in Ambur Iyyappa, who went on to become a millionaire, thanks to the ESOPs. The headcount was rapidly scaled to 150 that year.

It was in 2010 when Flipkart pioneered ‘Cash on Delivery’ in India, which changed the course of online retail in the country as consumers now paid for items only after receiving them, adding a layer of comfort to online shopping. Flipkart launched its logistics unit, eKart to smoothen deliveries.

In 2016, Flipkart achieved the milestone of 100 million registered customers and saw Sachin and Binny earning a spot among TIME magazine’s list of 100 most influential people.

At the beginning of last year, Kalyan Krishnamurthy was named as the new CEO, moving Binny Bansal to the role of Group CEO. Reports suggested that Tiger Global wanted better control of the organisation and hence, the decision.

Bansals’ e-commerce bet finally has paid off big time and set the 2018 M&A counters ringing with US retailer WalMart buying about 77% stake in Flipkart for $16 billion.

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