Flipkart suffers yet another valuation markdown

Flipkart22

Flipkart22Just when Flipkart Internet Pvt. Ltd was consolidating its position under the new CEO Kalyan Krishnamurthy, a fresh bout of valuation markdowns could prove to be a damper. More so, as the largest consumer internet company in India had experienced a tumultuous 2016.

In fact, Macquarie Group-owned Optimum Fund’s decision to lower the value of its holdings in the company by 3.26%, which sees Flipkart’s valuation at just $10 billion, is not good news for the company as it also prepares to raise a significantly large round of investment.

According to the filings with the US Securities and Exchange Commission (SEC), the US-based mutual fund has slashed the value of the shares to $93.15 for December 2016, from $96.29 apiece in September. It is a marked climb down, considering the $135.12 clocked in mid-2015.

The development was first reported by the Indian Express.

Optimum Fund holds 18,850 shares in Flipkart through its investments across five rounds, including Series A, C, E, G and H.

Earlier this week, a Morgan Stanley fund had valued the company at $5.39 billion, as it lowered the value of its holdings to $50.51 for December 2016, from $52.13 apiece in September.

In January, a mutual fund managed by Fidelity Investments, had also lowered the value of its investment in Flipkart by 36.1%, valuing the e-commerce marketplace at $5.56 billion.

In fact, Flipkart had experienced several valuation markdowns by American mutual funds, including Vanguard Group, Fidelity, Valic Co. and T Rowe Price, throughout 2016, compared to its peak of $142.24 in June 2015. The company, back then, was valued at $15.2 billion.

It would be interesting to see whether the latest developments cast a shadow on Flipkart’s chances of raising a fresh round of funding.

Encouraging show

In January, Flipkart had reportedly outrun rival Amazon India in gross sales for two consecutive months, after trouncing the US-based e-commerce giant with its Big Billion Day sales in October.

According to a Mint report, Flipkart had registered gross average sales of over Rs 2,600 crore for December and January, compared with Rs 2,300 clocked by Amazon Seller Services Pvt. Ltd. Flipkart’s numbers did not include the sales data from its fashion units Myntra and Jabong.

Earlier, Flipkart had pipped Amazon when it sold 15.5 million units at the Big Billion Days sale, beating Amazon’s 15 million units across the five-day Great Indian Festival.

Let Down

For Flipkart, 2016 witnessed sharp and successive markdowns and constant churns at the CXO-level, amid tough market conditions and slow growth.

This, eventually, had forced Tiger Global, its major investor, to take direct control of the company with the appointment of Krishnamurthy for the top job in early January.

Since then, Krishnamurthy, who is known for successfully executing strategies, had been focusing on growing its existing market and business, organically, while retaining the market share.

Fund raising efforts

The home-grown ecommerce major, meanwhile, is reportedly in talks with a bunch of investors, including global tech giant Microsoft Corp, online marketplace eBay Inc, online payment processing firm PayPal Holdings Inc, Google parent Alphabet’s investment arm Google Capital and Chinese online entertainment firm Tencent Holdings Ltd. According to a Mint report, it is looking to raise up to $1.5 billion (Rs 10,040 crore) at a valuation of $10-12 billion.

Flipkart’s investors include Tiger Global Management, Naspers, Accel Partners, Iconiq Capital, GIC, DST Global and Sofina Societe.