Flipkart seeks more funds from PE investors

Flipkart requires about $150 million (above Rs 800 crores)

from new PE investors in the next six to nine months to keep delivering. PE investors are unsure of the return in investment, online platforms would bring so they are not showing keen interest in the business. And current investors, Accel Partners and Tiger Global are not in a position to invest more after they pumped in $100 million (over Rs 500 crores) earlier this year.

While PE giants like Bain Capital and Kohlberg Kravis Roberts could look at it as a potential investment deal, they have first demanded a clarity on Flipkart’s ability to pull off a public issue. And if big investors like them don’t support the venture, Flipkart would have no funds to support its operations.

While US domiciled investors have shown keen interest in e-platforms like Flipkart, according to the Sebi regulations Flipkart has to be a foreign domiciled (offshore structured) entity for US listing. Flipkart with revenue topping $350 million (Rs 1,923 crores) has had negative gross margins till recently, but was able to pull off 2-3 per cent profit margins owing to extension of its product catalogue. It now wants to boost operating margins to 8-10 per cent in the next one year.

Indian market regulator stipulates profitability norms for listing on local exchanges. Flipkart, which invested heavily into backend logistics as a business differentiator, has started controlling runaway costs and letting go some employees. It has more than 5,000 delivery men servicing 45,000 orders daily.