Flipkart’s two main units concluded 2017-18 with mounting losses even as their combined revenues shot up by 39%.
Flipkart Internet, which runs the ecommerce platform, and Flipkart India, the wholesale unit, have reported a 71% increase in combined losses for FY18 at Rs 3,222 crore, up from Rs 1,883 crore in the previous year, according to regulatory filings with the ministry of corporate affairs (MCA), sourced from Tofler and Paper.vc. The combined revenues of the two entities stood at Rs 24,717 crore, up 38.6% from Rs 17,822 crore in FY17.
While Flipkart Internet, which earns commissions from the marketplace, reported a 30% fall in losses for FY18 at Rs 1,100 crore, its revenues jumped 35% to Rs 3,000 crore.
The trading unit Flipkart India reported a 40% increase in revenues at Rs 21,600 crore but saw its losses soar eight times at Rs 2,000 crore. The company had trimmed its losses by 55% in FY17 compared with FY16. “The increase in the net loss is due to employee benefit expenses, finance cost, purchase of traded goods and other miscellaneous expenses,” according to Flipkart India filing.
Both Flipkart Internet and Flipkart India have accounted for 80-90% of the turnover for Flipkart’s Singapore parent unit over the last three financial years. Flipkart Singapore also registers revenues and losses for payments business PhonePe, fashion portal Myntra and logistics unit Ekart. Flipkart has been aggressively investing in expanding its supply chain and payments business over the last 12 months.
The overall increase in losses underlines a trend of Flipkart stepping up its cash burn to battle it out with rival Amazon India, after an attempt at watching their cash burn closely during 2016 as it witnessed a funding crunch. The group had showcased heightened control on expenses during FY17.
However, later during 2017, Flipkart raised $4 billion from
Tencent, followed by US retail giant
Walmart buying 77% stake in the Singapore-registered parent in one of their biggest deals this year.
Flipkart India’s expenses for FY18 ballooned to Rs 23,722 crore from Rs 15,813 the previous year, indicating a 50% increase, while Flipkart Internet increased its total expenditure by a mere 8.5% to Rs 4,219 crore.
The competition in the Indian ecommerce sector is set to intensify further as both Amazon and Flipkart (now backed by Walmart) are unlikely to hold back on spends in their battle for market leadership.
This is already being reflected in the increased monthly cash burn from last year. According to industry estimates, Flipkart and Amazon India are expected to spend around $300 million each over three months starting October on marketing, discounts and hiring additional staff. Last year, this number stood at $100-150 million for Flipkart and around $200 million for Amazon India.
Both firms recently concluded their annual flagship sales clocking close to $2 billion in GMV.