SUMMARY
The Valuation Markdown By Valic Comes After Flipkart Raised Around $3 Bn Funds
Mutual fund investor Valic Co. has marked down the valuation Flipkart to $7.9 Bn, months after the ecommerce behemoth raised nearly $3 Bn in funds from SoftBank, Tencent, eBay and Microsoft.
In its latest quarterly report, Valic marked down Flipkart’s valuation slightly to about $7.9 Bn—which is way below the $11.6 Bn valuation at which Flipkart raised funds earlier this year. In the previous quarter, Valic had valued it at around $8.5 Bn. For the three months ending on 31 August, 2017, Valic valued each Flipkart share at $88.11, down from $94.27 in the previous quarter.
Interestingly Valic’s markdown follows the mark up by US-based investment company Vanguard Group in May this year. For the quarter ending May 2017, Vangaurd had marked up the ecommerce player’s shares by 56%. The mark-up comes after Vanguard maintained a constant valuation for Flipkart for the previous two quarters.
Though technically Flipkart’s latest fundraising was a “down round” from its peak valuation of $15 Bn, however the fundraise and endorsement by SoftBank was seen as a major victory for the ecommerce firm in its fight against rival Amazon India.
Flipkart, Valic And Its Valuation Seesaw
While companies like Flipkart don’t agree with the markdowns by mutual funds, with founders Sachin and Binny Bansal repeatedly dismissing these markdowns terming them as “theoretical exercises”, Valic’s markdown after Flipkart having raised significant amount of funds shows that some smaller investors in Flipkart are still divided over its valuation.
Prior to the latest markdown from Valic, Flipkart had also faced aggressive markdowns from some mutual fund investors such as Fidelity and Morgan Stanley, which slashed Flipkart’s valuation no fewer than five consecutive times. In March this year, Morgan Stanley had marked down Flipkart’s valuation fifth time in a row, pegging it at $5.37 Bn. Prior to that, in January 2017, US-based mutual fund investor T. Rowe Price reduced Flipkart’s valuation by another 4% to about $9.9 Bn. In the same month, a Fidelity managed mutual fund also downgraded its valuation by 36.1%, valuing it at $5.56 Bn.
Thus the timing of the latest valuation markdown comes as a surprise, as Flipkart has largely consolidated its position in ecommerce and strengthened its position against arch-rival Amazon India. While the markdown might not significantly damage its image much, it still points out to the fact that still some investors feel that India’s large consumer internet start-ups are overvalued. The markdown is also significant that now Amazon and Flipkart are involved in a very close battle for market position in India’s ecommerce space. As per a recent Morgan Stanley report, Indian ecommerce market will touch $200 Bn mark by 2027.
[The development was first reported by Live Mint]
