With tough fund raising scenario, Flipkart agreed to give small equity to media firm Times Of India owner Bennett, Coleman and Co. Ltd (BCCL) for advertising space in the latter’s media properties. Advertising has been the largest cash out area for Flipkart apart from payrolls. Deal will help Flipkart to keep advertising with out much impact to available cash reserves.
A private deal was made of Rs.260 Crores to buy a Class B variant stakes at Flipkart by BCCL. The documents were filled 3with registrar of companies and Tofler. Earlier BCCL invested about Rs. 26 Crore as ad equity as per the news from LiveMint.
Flipkart was struggling to raise fresh fund from the market and went in to cash cutting measures. This deal with BCCL have may not have dropped the valuation of Flipkart. Generally BCCL agrees to any kind of valuation for Brand equity. Brand equity in a way generally does not involve cash and they only give credit note to other companies to utilize their ad space. In return BCCL expects warrants to be issued which at a later date should fetch minimum ad value as a return. Technically BCCL will be selling their adspace at a credit. The investee will be given suitable option to get rid of BCCL either by paying the money used for adspace or by allocating a small part of equity at a preceding valuation. When ever a new investor comes at a lower valuation, brand equity will get equity at an updated valuation.
Times Internet Ltd. Gautam Sinha heads Times Internet as its CEO, while former CEO Satyan Gajwani is now vice chairman of the internet firm.
To keep their market value up to the mark, reports are that the e-commerce gaint is seeking to close funding of $1 Billion from unknown source in fresh capital. Since February 2016, Flipkart is on a hunt to raise new funding as 5 of the mutual fund investor of the firm have backed out. This made Flipkart valuation markdown to 60%.
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