Flipkart IPO, gains, losses and more: The new way to build a company

Flipkart made a loss of ₹5,189 Cr at a revenue of ₹82,787 Cr in FY25. The company has lost way over ₹50,000 Cr since its founding in 2007. And now it's going public.

People often wonder how loss making companies keep growing and getting funded. The answer is very simple (but very interesting): Some companies aren't in the business of selling products or services. They're in the business of selling their stock. This is not to say that these companies don't sell products or services. Of course they do. But that's not their bread and butter. Their bread and butter is the growth of their stock price. Everything else just leads to it.

So while Flipkart may still be making net losses of over ₹5,000 Cr after 18 years in business, it doesn't matter. Because all this while, its valuation has grown from 0 to $38B. In the conventional sense, Flipkart was never a simple company, it was always a "strategic asset". First for Tiger Global, and then for Walmart. Its value lied not in how much money it could make in a year, but in how much money it stopped Amazon from making. And that it did. Very well.

If you think about it, Walmart itself did a revenue of ~$650B with a net profit of ~$15B in FY24. For a company of that size, does Flipkart's $0.5B loss matter? No, it doesn't. What matters is how it bought Flipkart for $21B in 2018, and is now valuing the company at ~$40B as it goes public, while also placing a separate IPO for PhonePe at a $12B valuation.

So even if Flipkart bleeds, Walmart's books are green. That's the beauty of it.

In fact, Flipkart could keep losing money for another 5 years, and it'd be fine, unless something radically wrong happens with Walmart itself.

This kind of company building is very new and counter intuitive. Until the late 1990s, companies' stock prices used to be mostly synced with their ability to generate FCFs. Anything else was an anomaly at best. But with the magic of VC funding, profitability became a thing to worry about "in the future". Suddenly you could grow with a seriously baffling operating performance, but that could be a good thing, because of what "the future" holds. This is when we started seeing companies' valuations getting more and more disjointed with their balance sheets.

They say times have changed and profitability is back in vogue. But is that true? No. Modern funding has changed the nature of business building. And forever.

Interestingly, Rocket Internet also specialised in the business of "blitzscaling" copycats of successful internet companies in emerging markets, just so they could be sold to the OGs few years later. Taking their idea of creating "strategic assets", they came with Jabong, Foodpanda, etc. to India. Did it work out for them? No.

But it did work out for Tiger Global. It joined Flipkart in 2009, and exited its position in 2023 with total gains of $3.5B. Enroute, it changed India and its entire startup ecosystem. Forever.

Mr. Lee Fixel is a grandmaster to have pulled this off. Hats off!

Mr. Lee Fixel. The writer of the Flipkart story.

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