India's largest e-retailer drives growth India's largest internet retailer, Flipkart, has raised $200m from its existing shareholders in a deal that highlights investors" confidence in the prospects for e-commerce in the country, where bricks-and-mortar retail is being stymied by high real estate costs and state controls. The capital from Naspers, a South African media group, Silicon Valley based-Accel Partners and New York-based Tiger Global Management is the latest in a series of foreign investments into India's burgeoning e-commerce market, despite New Delhi's policy technically prohibiting foreign direct investment in internet retailers. Late last year Accel Partners, the first venture capital fund to invest in Facebook, Tiger Global and two other foreign funds invested a total of $25m into Myntra, an Indian fashion e-retailer, which has raised a total of $75m in several rounds of financing. More recently Snapdeal, another Indian e-retailer, raised $50m from a consortium of investors led by eBay. In June, a Naspers subsidiary bought out Bangalore-based online bus ticketing company RedBus for an undisclosed sum. Another of India's fast-growing internet-based apparel retailers, Jabong, is backed by German internet incubator Rocket Internet - the vehicle of the Samwer brothers. Arvind Singhal, chairman of retail consultancy Technopak, says Indian e-commerce companies are using various structures to circumvent the ban on foreign investment. These include hiving off part of their operations into separate wholesaling and logistics ventures, into which foreign capital is permitted. Flipkart said it operates partly on a "marketplace model," where other companies sell goods and services through its internet platform - a structure in which foreign investment is also allowed. "We are in compliance of all the applicable regulations," Flipkart said. Meanwhile, Amazon also announced last month it was setting up its own shopping website in India, through which local retailers can sell their goods under Amazon's banner and use its delivery services, thereby sidestepping the foreign investment restrictions. E-commerce - especially the sale of physical merchandise - is still in its infancy in India. Technopak estimates Indian e-commerce companies, including popular travel websites, together had combined revenues of about $10bn in the financial year ending in March 2012. Of that, sales of physical merchandise - such as books, consumer electronics, baby supplies and clothes - accounted for just about $600m, while the majority of revenues were for the sale of plane, train and bus tickets, hotel bookings and other services. But with corporate retail struggling to expand in a market still dominated by independent mom-and-pop shops, an increasing number of Indians, enabled with computers or smart phones, are turning to the internet to buy clothes, books and electronics. In a white paper released last month, Technopak estimates that internet sales of merchandise could grow a hundred fold in the next nine years to be a $76bn market by 2021, buoyed by the wide geographic dispersion of Indians with buying power in dozens of small cities and towns, where availability of quality products is limited. "Investors understand very clearly the power and potential of e-commerce in India," Mr Singhal says. It's about taking early bets and hoping some of those bets will pay out. Flipkart, which was founded in 2007 by two former employees of Amazon, and aspires to be India's equivalent of the giant US-based retailer, is believed to be the biggest player in the sector. The company had revenues of under $100m for the financial year that ended in March 2012, though it declined to provide figures for the more recent financial year. However, Flipkart said the company has a goal of selling $1bn worth of merchandise a year by 2015, and is currently "halfway there." Additional reporting by Avantika Chilkoti in Mumbai