In a move that is being seen as a shot in the arm, HDFC Bank has invested its faith – and its money – in e-commerce Flipkart.
The private sector lender has given Flipkart a loan of Rs 450 crore according to papers filed by the e-commerce giant with the Registrar of Companies (RoC).
Flipkart has provided fixed deposits as security to the bank, the RoC documents show. Flipkart India struck the deal with HDFC on February 23, 2016.
According to HDFC Bank sources who wish to remain unnamed, the money will be used to fund day-to-day operations at Flipkart.
The need for the funding arose for a number of reasons, the main being the recent marking down of Flipkart shares by Morgan Stanley. The marking down hit Flipkart hard, bringing down its valuation to $11 billion.
Another reason for the funding is the fact that the company extensively burns cash to provide deep discounts to customers and also the overall slowdown in investments particularly in e-commerce.