In the wake of stiff competition from Amazon, India’s largest e – commerce firm, Flipkart, is for the first time, looking to attract new investors by hiring investment banks like Goldman Sachs. Flipkart so far, has managed to raise higher amounts of funding, in the various investment rounds from its existing investors, relatively easily. Flipkart has held talks with several investment banks including Goldman Sachs Group Inc. as it needs help in raising more funds. Flipkart has raised U.S. $2.6 billion through the various rounds of investments from its existing investors so far. Flipkart however, has not yet decided on whether it needs the help of an investment bank or whether it will look for new investors on its own. Read more on Investments
Flipkart along with its fashion websites Myntra.com and Jabong.com generates gross revenue of U.S. $40 million per month. At this rate the company will have enough cash to last 18 to 20 months. However, as its cash pile reduces, the company’s ability to dictate terms to new investors will also reduce. This fact has prompted its founders, Sachin Bansal and Binny Bansal and its current investors including Tiger Global Management to seek new investors and funds immediately. The company is looking to raise U.S. $15 billion in its next round of investment. However, Venture Capital (VC) investors say that Flipkart will find it difficult to raise that amount of investments owing to two main reasons:
- Amazon is continuously expanding its business.
- There is a growing belief in the investors circle that Flipkart is overvalued.
If Flipkart decides to hand over the job of attracting new investors to investment banks, it will be a big win for investment banks because they missed out on the large fund-raises by Indian Internet Companies during the years, 2014 and 2015. Investors were so keen back then to invest on the bubbling Indian start-ups that a majority of funding rounds were done directly with no bankers. This year however, the funding of startups from investors has slowed down owing to global uncertainties on the Indian market. This has forced many Indian Internet Startups to approach investment banks for attracting new investors and investments. Early in 2016 (this year), Flipkart’s high-profile leadership hiring model and the marketplace model had flopped! A worrying number of leadership changes created turmoil in the company and its valuation was marked down by as much as 40% by some of its investors! It will be interesting to see if investment banks like Goldman Sachs Group Inc. get a change to make a bonanza out of this dire situation Flipkart is in. Read more on Startup News