Flipkart Shareholder Structure: Tiger Global’s Stake Drops From 33.6% To 20.5%

In the Indian startup ecosystem, homegrown ecommerce unicorn Flipkart led the funding race in 2017, having secured over $4 Bn across two rounds from a clutch of domestic and foreign investors, including SoftBank, Tencent, Microsoft and others.

Despite the massive fundraise, the online marketplace saw a major drop in valuation from $15.2 Bn at its peak in 2015 to $11.6 Bn in April last year, around the time when it raised $1.4 Bn funding from Tencent, eBay and Microsoft. As part of the deal, Flipkart also acquired the Indian business of eBay.

Interestingly, Flipkart’s valuation has undergone numerous markups and markdowns over the last few years. In April 2016, US-based mutual fund investor T. Rowe marked down the ecommerce firm’s shares by 15%. Later in July 2016, it further marked down the value of Flipkart’s shares by 20% to $96.29 per share. In January 2017, T. Rowe reduced Flipkart’s valuation by another 4% to about $9.9 Bn.

In November 2016, investor Morgan Stanley, one of Flipkart’s mutual fund investors, too slashed the value of its shares by 38.2%. The firm first invested in the ecommerce marketplace when it raised $160 Mn in October 2013.

The decrease in valuation began in February 2016, when Morgan Stanley marked down Flipkart shares by 27%. Later in May 2016, for the second time in a row in a successive quarter, Morgan Stanley Mutual Fund Trust, lowered the value of its shares in Flipkart by 15.5%, pegging the startup at $9.39 Bn.

In March 2017, Morgan Stanley had marked down Flipkart’s valuation for the fifth time in a row, estimating it at $5.37 Bn. Most recently, however, it marked up the valuation of homegrown ecommerce behemoth Flipkart to $9.36 Bn for the quarter ending on September 30, 2017.

Interestingly, in November 2017, another mutual fund investor Valic Co. marked down the company’s valuation to $7.9 Bn, months after its $2 Bn-$2.5 Bn fundraise from SoftBank and others.

An Overview Of Flipkart’s Current Shareholder Structure

Post the $2.5 Bn fundraise from Japanese investment behemoth SoftBank, the ecommerce company’s shareholder structure underwent certain changes. As per a report by ET, Chinese Internet conglomerate Tencent currently owns a 6% stake in Flipkart.

On the other hand, US-based hedge fund Tiger Global, which was once the company’s largest backer with approximately 33.6% stake, now controls around 20.5% of Flipkart’s shareholding. As reported by Inc42 earlier, the firm was one of the biggest beneficiaries of Flipkart’s share buyback last year, when it sold shares worth more than $424 Mn in Flipkart to SoftBank.

Reports of Tiger Global’s intentions to partially exit the venture first surfaced in March 2017, when it initiated talks with SoftBank to “sell a part of its stake in Flipkart in exchange for a merger with Snapdeal”. As per sources, the firm was looking to divest a third of its shares in exchange for $1 Bn from SoftBank.

However in April, when the homegrown startup raised $1.4 Bn from Tencent, Microsoft and eBay, Tiger reportedly sold a part of its holding in Flipkart. Later in August, it was reported that a large portion of SoftBank’s $2 Bn-$2.5 Bn investment in Flipkart was actually paid to US-based hedge fund Tiger Global in exchange for one-third of its shares in Flipkart.

As part of the secondary share sale last year, Flipkart co-founder and Group CEO Binny Bansal also sold shares worth $30 Mn-$35 Mn, which caused his stake in the startup to drop from 7.6% to 5.2%.

Although the company’s other co-founder Sachin Bansal did not partake in the secondary share sale, he saw his stake in the venture getting diluted to 5.5% due to the massive fundings secured by Flipkart from SoftBank, Tencent and others.

Flipkart: YoY Revenue Soars To $3.09 Bn, 68% Jump In Losses

Amid heavy losses and ongoing litigation with the taxation department, Flipkart Group reportedly registered a 29% YoY increase in its revenue, at a staggering amount of $3.09 Bn (INR 19,854 Cr) for the financial year which ended in March 2017. However, Flipkart continued to record high losses, which reached $1.3 Bn (INR 8,771 Cr) and translated to an increase of 68% from a loss of $814 Mn (INR 5,223 Cr) registered in FY16.

As indicated in the financial reports of Flipkart, a five-fold increase in finance costs of $671 Mn (INR 4,308 Cr) contributed to the losses in FY17. This was essentially blamed on the company’s degraded valuation of $11.6 Bn in April 2017 from $15.2 Bn in 2015.

While its biggest rival Amazon has remained steadfast in its commitment to the Indian market and has continued to fuel its local business through massive fundings, Flipkart is reportedly in advanced talks with global retailer Walmart to sell a significant minor stake. If the deal goes through, Walmart may acquire 15%-20% stake in Flipkart, thus combining their forces to challenge Amazon.

How successful Flipkart is in thwarting competition from heavily-funded Amazon and Paytm Mall remains to be seen.