INDIA – Flipkart India, the wholesale arm of the Walmart-owned eCommerce marketplace in India, has received US$201.27 million (Rs 1,431 crore) from its Singapore-based parent entity Flipkart Private Limited.
The fund infusion by Flipkart comes as the company seeks to fight off the challenge from Amazon to keep its leadership of India’s growing $18 billion online retail market,
The eCommerce industry is currently struggling with the government’s new foreign direct investment (FDI) regulation for e-commerce firms that will significantly affect firms like Flipkart and Amazon among other online retail industry.
Flipkart India purchases goods in bulk from manufacturers and sells them to
preferred sellers a business operating model which has come under pressure following the recent changes in FDI regulations for eCommerce companies.
According to the FDI regulation, as clarified by the Department of Industrial Policy and Promotion (DIPP), the FDI policy for eCommerce disallows players such as Amazon and Flipkart from selling products from wholesalers in which they directly or indirectly have any stake.
The new FDI regulations are seen as a strategic decision from the government to promote business and create livelihoods by keeping competition alive, protecting small retailers and preventing mischievous consumer behaviour by creating a level playing field between offline and online retailers.
The new policy requires the marketplaces to comply with the new rules,
for which they’ve sought an extension, by February 1 2019.
According to documents filed with the Registrar of Companies (RoC), Flipkart’s
parent entity was issued 486 000 shares in Flipkart India on January 7 at a
price of US$ 412.08 per share.
Flipkart’s chief executive, Kalyan Krishnamurthy, said the company had witnessed transaction growth of more than 80% in some months as e-commerce was booming again and the company planned to push newer categories such as furniture and groceries over the next three years.
Flipkart invested US$307 million in Flipkart India in December last year, making the new investment highly unusual since it had previously the company has previously spaced out its fund infusions in its Indian subsidiaries.
Together, the two investments bring the total investment in Flipkart India to over US$ 504.6 million.
