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Flipkart's losses widen to Rs8,771 cr despite 29% rise in revenue

03 February 2018

Flipkart Ltd, the Singapore parent of online retailer Flipkart, has reported a loss of Rs8,771 crore ($1.4 billion) for the financial year ending March 2017, even as revenues rose by 29 per cent to Rs19,854 crore, regulatory filings show.

The company had reported a net loss of Rs5,223 crore for 2015-16, showing a 67 per cent increase in loss for the ecommerce major. This indicates the deep spending Flipkart has done on discounts and marketing in the last financial year to fight American rival Amazon, which has also been spending aggressively in India.

In 2016-17, Flipkart's revenue grew to Rs19,854 crore at the end of March 2017 compared to Rs15,403 crore in the previous financial year, documents sourced from business research platform Paper.Vc showed.

This was primarily on account of a five-fold increase in finance costs to Rs4,308 crore, driven by a fall in valuation. Flipkart's valuation fell from $15.2 billion in 2015 to $11.6 billion in April 2017, when it raised capital in a round led by Chinese internet conglomerate Tencent. The cost incurred - called "fair value loss on derivative financial instruments" -stood at Rs3,412 crore in FY17.

Without this steep cost, Flipkart's overall loss would have increased by 2.4 per cent, indicating heightened control on expenses during the period.

The latest financial numbers come at a time when Amazon announced its final quarter result for 2017 where it reported a $3 billion of loss for international business.

For Flipkart, which closed $4 billion in funding last year, 2016 was tough but it managed to make a turnaround during the festive sales to protect its leadership position.

Apart from the finance costs, Flipkart has been able to control all other costs. For instance, cost of talent - including salaries and stock-based compensation - went up only by 9 per cent to Rs2,052 crore in FY17, as compared with a 124 per cent spike in FY16. Similarly, advertising and business promotion expenses also went up by just 9.4 per cent to Rs1,188 crore, as compared with a 100 per cent jump in FY16, The Economic Times reports.

Flipkart chief executive Kalyan Krishnamurthy told The Times of India recently that the company was focusing on metrics like active monthly users and number of transactions they do on Flipkart, moving away from traditional practice of tracking gross sales as a measure of success.

Another primary focus for it is the private label brands across categories from fashion to electronics and smartphones which can help improve the margins. They are expected to account for 15-20 per cent of its overall sales volume within three years.

According to ET, experts said that one of the major reasons why Flipkart has been able to turn around its operations is stability in the management team. But for a standalone online retail business to make money will be tough, as rivals like Amazon and Alibaba make huge profits from cloud services and advertising business, respectively.

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