India: Flipkart, payments arm PhonePe in talks to raise fresh capital

Source: https://www.dealstreetasia.com

Walmart Inc.-owned Flipkart has initiated talks with strategic investors to raise fresh capital after discussions with Google Inc. collapsed earlier this year, two people familiar with the matter said.

Flipkart’s payments arm PhonePe may raise funds separately as it seeks to catch up with bigger rival Paytm, the people cited above said. PhonePe separately also received $175 million from Walmart last week, as part of the $500-million commitment, they added.

Mint couldn’t ascertain the names of the investors Flipkart is talking to.

When Walmart announced its deal to buy out 77% of Flipkart for $16 billion in May, the US-based retail giant had indicated that it planned to bring more strategic investors on board at Flipkart at some point. Google was among the strategic investors Flipkart was in talks with at that time. But those discussions collapsed after the exit of Flipkart co-founder Sachin Bansal, who was keen to add Google to Flipkart’s shareholder roster. Bansal left the company in May. Google is now planning to launch its own e-commerce platform separately in India.

Flipkart did not respond to a request for comment.

If PhonePe also gets more strategic investors outside Walmart, it may look to raise up to $1 billion sometime next year, the two people mentioned above said.

For its part, Walmart has indicated that it is willing to continue funding PhonePe for the near future, but is open to the idea of bringing in other strategic partners, the people cited above said.

A PhonePe spokeswoman confirmed that the payments firm had received a $175 million funds infusion from Walmart, but added that PhonePe was not looking to raise capital from outside strategic investors.

“We would like to confirm we that have got a fund infusion of $175 million to continue with our aggressive expansion plans in the offline and online space. This is part of the $500 million commitment that was made to us. Walmart has added these funds to help us compete even more aggressively, grow faster and take on competition,” the spokeswoman said in an email.

“In terms of additional fund raising we are very well-funded and have commitment from Walmart when the need for additional funds arises in the future. Any discussion in terms of strategic partners does not involve bringing other partners for capital at all,” she added.

While Flipkart is currently extremely well funded and is in no urgency to raise more funds, it will still need a significant amount of capital over the next few years to maintain its leadership position, amid an expensive market share battle against Amazon. Thus it makes sense for Flipkart to bring in more strategic investors and reduce its reliance on Walmart, even though Walmart will continue to back the company through the near and distant future, given that the US-based retailer sees Flipkart as a long-term bet that will take time to bear fruit.

On 22 May, Mint reported that Flipkart is likely to burn through as much as $2 billion in cash over the next 18 months—an affirmation that sales growth, rather than cutting losses, remains the top priority for the online retailer after being bought out by Walmart.

For PhonePe, the time is ripe to bring in fresh investors at a favourable valuation, given the current boom in India’s digital payments business, amid a massive funding uptick in the country’s start-up ecosystem.



Categories: Asia, Business, E-commerce, India, Retail, USA

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