This is why Flipkart is reducing its cash-flow in the marketplace by 70%

Indian e-commerce giant, Flipkart, reduced investment into its marketplace unit by around 70% in the year ended March. This has effectively restrained the firm’s sales during the period.

In fiscal 2016, Flipkart Marketplace, a Singapore-based subsidiary and investment holding company, got an equity infusion of Rs. 1,629 which is quite less. In 2015, it got an infusion of Rs. 5,456 crore. Flipkart has banked on investments to drive sales growth, primarily using the cash to lure customers with huge discounts.

Flipkart has raised an amount of $3.2 billion in eight years and has a lead in the market. As per reports, Flipkart has reduced its cash burn by about 40% this year.

"It is much lesser than $40 million. Supply-chain costs have improved by 20% and we have also done a lot of work in getting our seller costs in shape,” ET quoted a person as saying.

Flipkart's gross merchandise value, or gross sales, remained stagnant at $3.5 billion-$4 billion for most of the past year-and-half, before inching back to $4.5 billion-$5 billion in recent months.

On the flip side, Amazon India received capital infusion of Rs 7,463 crore in fiscal 2016, up from Rs 1,888 crore in the previous year as it is trying to narrow the gap with Flipkart in the country.

Amazaon is outspending Flipkart by two three times. The total equity investment in Flipkart Marketplace until now stands at Rs 7,909 crore, with most of the money flowing in during recent years.

Amazon Seller Services's total infusion stands at about Rs 9,600 crore. The two companies are competing to trump each other during their ongoing festival sales, although analysts say Flipkart's investment in marketing and advertising is significantly lower this time.

"Flipkart is reaping the benefits of investing a lot over the past two-three years. They have created a brand value so they may not have to invest as much," Satish Meena, analyst with Forrester Research told ET.

Flipkart India and Flipkart Internet reported a combined a loss of Rs 2,000 crore for fiscal 2015, show filings with the Registrar of Companies.

Their combined sales trebled to Rs 10,390 crore that year, with Flipkart India accounting for over 90% of it. Financial numbers for the year ended March 2016 are yet to be filed.