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With Flipkart raising a $1 billion, here is all you need to know about the company

Wednesday, 30 July 2014 - 6:10am IST | Agency: dna

India's top e-retailing giant Flipkart on Tuesday announced its intention to become the first Indian $100 billion company, after bagging another $1 billion (Rs6,000 crore) in a funding round. It has a long way to go since Flipkart today is only a $6 billion company but the scale and speed of its growth is being watched with amzement the world over. On such a big day, customers across the country were disappointed when the second round of sale of the Chinese Xiaomi Mi 3 phone was over in 5 seconds.

How and why is Flipkart rasing more money?
With the infusion of funds Flipkart hopes to scale up its operations. In a short span of six years it has become a household name in India. With the $1 billion infusion the plan is clearly to go public. One of the investors is Singapore sovereign fund GIC. Company owners Binny Bansal denied that an IPO is an immediate plan: "We are still in a stage where we are figuring out stuff about our business. We have not settled on one particular business model that can be taken public."

Why are so many funding agencies pouring money into Flipkart?
Reason is the valuation in a couple of years could be over $50 billion. So $1 billion put in now could be five times that in a couple of years. Hence venture funders are queueing outside the Flipkart office. Also Flipkart needs all the cash it can to keep Amazon at bay in India. Flipkart sales crossed $1 billion recently. Internet companies cannot make profit by selling stuff below its sales price, it is fully a valuation game. Also Flipkart does not make a single product.

Is Flipkart an Indian company legally?
Unlikely considering the amount of foreign funding it has received. The company is now registered in Singapore. Legally a foreign company cannot carry on multi-brand e-retailing in India, and so Flipkart has moved to the marketplace model and sell stuff in India through a company called WS Retail. Other companies too can sell on the Flipkart platform. Flipkart has been highly secretive about its holding pattern.

Why are some new smartphones sold exclusively on Flipkart?
Like the Xiaomi now and earlier the Motorola's MotoG, exclusive sale of a smartphone helps create a pressure cooker effect. In each round of selling like yesterday's only a few number of phones are put on sale, approximately 25,000 units, which get sold out in 5 or 10 seconds. Flipkart has till now not revealed sales of MotoG or Xiaomi Mi3, which is meant to increase speculation. This helps the phone company as well.

What are customers who tried to buy Xiaomi saying?
"When I hit the buy button, I got a 'something went wrong, retry' message with a hyperlink. Clicking that led me to the same page reloading again and again," said a customer in Mumbai.
"Can an entire stock of smartphones get sold online in less than 5 seconds?" asked another customer.

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