Flipkart Continues To Bleed Even After Raising Rs 30,000 Crore
Flipkart Ltd.’s losses rose five-fold to nearly Rs 10,000 crore as it burnt cash to offer discounts in the three years through March 2016. That’s nearly the same amount that India’s largest online retailer raised in its latest funding round.
China’s Tencent Holdings Ltd., technology behemoth Microsoft Corp. and U.S.-based e-commerce giant eBay Inc. will invest $1.4 billion (around Rs 9,100 crore), valuing Flipkart at $11.6 billion. The latest investment contributes nearly one-third of Rs 30,000 crore the e-tailer has raised over the past four years.
Flipkart is battling to protect its turf from Amazon.com Inc., which has committed to invest $5 billion in one of the world’s fastest growing online retail markets. The homegrown e-tailer’s revenue rose five-fold to Rs 15,403.3 crore in the three years through March 2016 as it chased top line over profits to lure 10 crore Indians to its platform, according to company filings.
The e-tailer’s losses are likely to go up in the financial year ended March 2017, said Arvind Singhal, chairman and managing director of retail consultancy Technopak Advisors.
I don’t think the losses can come down, as a lot of growth that is coming to these e-commerce companies is on the back of deep discounts and aggressive advertisements. If you reduce the advertising, marketing and discounting spend, your revenues will come down, but that will hit your growth.Arvind Singhal, Chairman And Managing Director, Technopak Advisors
To slow down or not is a big dilemma for e-tailers when there is a competitor like Amazon which is expanding aggressively and adding more categories, warehouses and distribution centres, he said.
Flipkart, in reply to an e-mail by BloombergQuint, said the company does not comment on its financials as a policy.
Flipkart is registered in Singapore with an ordinary share capital of $45.92 million comprising of 16.78 million shares. The company also raised $3.38 billion in preference capital comprising 81 million preference shares distributed among more than 100 shareholders, many of whom participated in multiple rounds of funding since 2011, according to the filings with the Accounting and Corporate Regulatory Authority of Singapore.
Decoding Its Financials
Flipkart saw its revenues rise 50 percent to Rs 15,403.3 crore in 2015-16 over the previous year. The earnings (loss) before interest and taxes for the company rose 80.4 percent during the period to Rs 4,661.2 crore.
The loss after tax for the company rose 75.4 percent to Rs 5,223.8 crore in 2015-16. Which means, the company was staring at an accumulated loss of Rs 9,999.4 crore, which doubled from the previous year.
Retail is an industry with wafer-thin margins, since the bulk of the expenditure is incurred on real estate, warehousing and marketing. Flipkart, which runs a marketplace and has it own warehousing and logistics arm for an inventory-led model, had negative operating margins of 30.26 in 2015-16.
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Negative Cash Flows
Prior to the latest funding, Flipkart had been running its operations with the Rs 20,255.86 crore it raised from investors over the three years through March 2016, according to the filings. Its best year was 2014-15 when the company raised Rs 12,932.2 crore.
The company had a negative cash flow from operations of Rs 7,808.64 crore in the three financial years from 2013-14 to 2015-16. It had a negative cash flow from an investment of nearly Rs 8,889.5 crore in various assets and subsidiaries during the period.
Cash flow reflects the amount of cash generated or lost from operations, investments or financing activities like fund-raising.