Flipkart acquires Letsbuy.

com
Business Strategy
Komal Gupta Erollment No - 10BSP1139 Section - C

Online retailer Flipkart.com on Thursday said that it has acquired Gurgaonbased internet startup Letsbuy.com. The acquisition was funded through a combination of cash and equity, but the company did not disclose value of the deal. Letsbuy.com, started by Hitesh Dhingra and Amanpreet Bajaj in 2009, had a reasonable presence in the consumer electronics space. With over 400 brands in electronics category, it has over 350 people and warehouses across four cities in India. Founders of Letsbuy along with employees will function independently, Flipkart noted. The acquisition came at a very attractive price for us and the timing has also been ideal. The synergies will now allow us to accelerate faster and get to a share similar to what we enjoy in the online books category, said Sachin Bansal, co-founder and CEO of Flipkart. Unconfirmed reports say the deal is valued at $20 million. Backed by a funding of $31 million from leading global investors, Flipkart, has become a household name in the e-commerce space. In a recent interview with FE, the founders told that they expect to clock revenue of around R2,500 crore by March 2013 and initiate their international foray in a few years. This fiscal, the online retailer plan to close with revenues in the region of R500-600 crore. Letsbuy.com founder and CEO Hitesh Dhingra said, The company had a choice to raise a large round of funding as well, however, aligning our business with the largest player in the market made sense. Letsbuy.com gets about 5 million monthly visits and ranks among top 200 websites. Currently, there are about 100 million internet users in the country, while the total advertisement spend online is about $200 million, of which Google makes about $100 million. Experts point out that the current online ad spend is extremely low compared to other mature markets. Indias largest and most-funded e-commerce company Flipkart Online Services Pvt. Ltd acquired Letsbuy.com , the countrys second-largest online electronics retailer, for an undisclosed amount, the third purchase by the five-year-old company in the past two years.

While the company that runs Flipkart.com declined to divulge financial details,MediaNama and VC Circles Techcircle.in pegged it at $25-30 million on their respective websites. Letsbuy.com, which gets 5 million monthly visits, was started in 2009 by eTree Marketing Pvt. Ltd and sells items such as mobile phones, cameras, laptops and home appliances. The move reflects Flipkarts strategy of growing through acquisitions as ecommerce companies strive to become a one-stop shop for buyers and seek to boost their presence in a market thats expected to grow more than 10fold in the next few years. Consolidation is a natural way for things to evolve, said Kanwaljit Singh, managing director, Helion Venture Partners. Helion is an investor in Letsbuy.com. Singh refused to say if the acquisition has offered an exit to the investment firm. The acquisition also reiterates that e-commerce in India is likely to be dominated by cash-rich companies that can leverage their financial strength for scaling up and strengthening their position, analysts said. Letsbuy.com, which recently launched categories such as watches, toys, sports and office supplies, works with more than 400 electronics brands. The acquisition is a combination of cash and equity and the founders of Letsbuy.com, along with more than 350 employees, will function independently, Flipkart said in a statement.Letsbuy.com will use Flipkarts technology platform and supply chain capabilities. This acquisition fits into our strategy of building dominant shares in all categories we operate in, said Flipkart co-founder and chief executive Sachin Bansal, adding that the acquisition opportunity came at a very attractive price... The synergies will now allow us to accelerate faster and get to a share similar to what we enjoy in the online books category. This is the third acquisition by Flipkart, which began operations in 2007. In 2010, it acquired social book discovery tool WeRead from Lulu, a US-based on-demand publishing firm. Last year, Flipkart acquired Mime360, a unit of Mallers Inc., a Mumbai-based startup that offers an exchange platform connecting content owners with content publishers. Letsbuy.com founder and chief executive Hitesh Dhingra said the company had a choice to raise a large round of funding as well. However, aligning the business with the largest player in the market made (more) sense, he said.

Flipkart will continue to scout for more acquisition opportunities and any business that offers access to a larger customer base. The complementary businesses could include supply chains, payment gateways, brands that have a different positioning, said Binny Bansal, co-founder, Flipkart. Consolidation could gain ground because of the tightening of capital for ecommerce startups that are looking to raise their next round of funding in the coming months. The cost of customer acquisition is higher than average revenue per customer and companies are burning money on each customer, said Deepak Srinath, director of Bangalore-based boutique investment bank Viedea Capital Advisors Pvt. Ltd. Venture capital investors, who have taken multiple bets in the e-commerce space, could also trigger consolidation, he said. They may look at consolidating their holdings in companies that are not performing as well as were expected or are not able to raise the next rounds of funding, he said. Flipkart and Letsbuy have common investorsTiger Global and Accel Partners. In 2011, venture capitalists (VCs) and private equity (PE) investors pumped $500 million into 67 dealsthe highest number in any year till date, according to VCCEdge, an online tracker of investment activity. According to the Internet and Mobile Association of India, Internet users in the country have crossed the 100-million mark, of which 17 million are online shoppers. It estimates that the number of Internet users in India will triple by 2015, as will the number of online shoppers. According to a November report by Avendus Capital Pvt. Ltd on the digital consumer industry, e-tailing is set to become a Rs53,000 crore market by 2015 from the current Rs3,600 crore, but still accounting for just about 1.4% of the Rs36 trillion retail market in India. Meanwhile, in another e-commerce investment, Bangalore-based ecommerce firm Myntra.com raised $20 million in its third round of funding led by Tiger Global. The news was first reported in Pluggd.in on Thursday. Mukesh Bansal, founder ofMyntra.com, could not be reached on the phone, and Mintcould not independently verify the development.