Carlyle, General Atlantic in talks to invest $200 mn in Flipkart

Private equity firms Carlyle and General Atlantic are in talks to jointly invest about $150 million to $200 million in online retailer Flipkart, according to two sources with knowledge of the deal.

Although the Indian online retailing market is small now, few people doubt that e-commerce will one day be big business in India, a country of 1.2 billion people whose rapid economic growth is adding millions to the middle class every year.

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The Indian e-commerce market is expected to grow 47 percent to more than Rs 46,000 crore ($9.2 billion) this year, according to the industry group Internet and Mobile Association of India.

US private equity firms Carlyle and General Atlantic will pick up a minority stake in Flipkart after their investment, said two sources with direct knowledge, declining to be named as the talks are not public yet.

A deal is being held up due to differences in valuation between Flipkart and the investors, one of the sources told Reuters.

Sachin Bansal, chief executive and co-founder of Flipkart, declined to comment when reached by Reuters. Carlyle also declined to comment, while General Atlantic did not immediately respond to mail seeking comment.

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Flipkart is India’s biggest online bookseller, with over 10 million titles distributed from warehouses in five cities. It also sells mobile phones, appliances, gaming consoles, music and movies.

It generated $11 million in sales last financial year, and expects revenue to cross $100 million this year. It is targeting $1 billion in revenue by 2015.

Bangalore-based Flipkart had earlier raised $31 million in funding from US venture capital firms Tiger Global Management and Accel Partners, which has a stake in Facebook.

The company, set up by two ex-Amazon.com software developers in 2007, got its first round of funding worth $1 million by Accel Partners in 2009, followed by Tiger Global’s $30 million investment in two tranches.

The possible fourth round of funding by Carlyle and General Atlantic would help Flipkart to boost its business network ahead of Amazon’s entry into Asia’s third-largest economy, one of the sources said.

Amazon, the world’s top online retailer, has no formal presence in India yet, though a source said last month it was mulling plans to set up retail operations in the country next year.

Private equity investment in India is accelerating, as rising borrowing costs and dormant public markets push firms to cut deals with buyout firms in return for much-needed cash injections.

Indian companies signed private equity deals worth $3.2 billion in the first nine months of 2011, up from nearly $2 billion in the same period last year, according to data from Thomson Reuters.

The deals include India’s second-biggest private equity investment of the year, with Apollo Global Management injecting around $500 million in Indian steel pipe maker Welspun group in June.

India is flooded with private equity firms looking for investments - from global buyout shops like Blackstone, 3i Group and KKR, to homegrown firms like IDFC and IFCI.

Reuters