Flip­kart De­val­ued Again to $9 bn

In the short term, Flip­kart’s marked down val­u­a­tion might po­ten­tially harm the in­ter­ests of the startup com­mu­nity. But it is not as bad a news as it seems

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Flip­kart has ruled the etail busi­ness in In­dia since 2007 when it was first launched as the on­line book­store. Over the years, be­cause of the prom­ises it showed, its val­u­a­tions soared as in­vestors from all over the world lined up at its doors. But its hon­ey­moon pe­riod sud­denly came to an end ear­lier this year when Mor­gan Stan­ley and T Rowe Price down­graded their hold­ings in Flip­kart by 27% and 15% re­spec­tively. Sud­denly its val­u­a­tions were down from $15 bn to about $11 bn. It shook the in­dus­try. There were sud­denly talks around be­ing prof­itable. An­a­lysts mur­mured the loop­holes in the ap­proach Flip­kart had been adopt­ing to stay ahead in the mar­ket. Even the news emerged that Flip­kart was work­ing hard to re­duce the losses over a pe­riod of time. The com­pany also reshuf­fled its lead­er­ship team.

How­ever, it looks like the etailer’s steps have not im­pressed other in­vestors. This is the rea­son that two more in­vestors in Flip­kart have now marked down the value of their stakes in the com­pany by about 20%, ac­cord­ing to the reg­u­la­tory fil­ings made with the US Se­cu­ri­ties and Ex­change Com­mis­sion (SEC). This has sud­denly brought down the e-tailer’s val­u­a­tion ef­fec­tively in the range of $9-10 bil­lion. In other words, in less than three months Flip­kart has be­come a $9-$10 bn com­pany from $15.2 bn. Ac­cord­ing to the Times of In­dia, “While Fi­delity In­vest­ments reval­ued its Flip­kart shares at $82 apiece com­pared to $103.97 as of Novem­ber 2015, Valic Co, an­other mu­tual fund in­vestor, re­duced the value of its Flip­kart shares by about 20% to $98.19 per share from $123.11 in Novem­ber last year. Fi­delity and Valic had bought shares in Flip­kart’s series D round in 2013.”

On the face value, it is an ugly news for those who are des­per­ately seek­ing funds for their dud ideas. Nonethe­less, it is a great news for star­tups who can show prom­ise and are work­ing in the side of solv­ing real busi­ness prob­lems. At the same time, this should open the eyes of in­vestors who ran af­ter the quick buck by sim­ply buy- ing stake in over-hyped ven­tures. Cases of Hous­ing.com, Pep­per­Tap and oth­ers in re­cent times should be more than suf­fice to learn from.

Sense should be ap­plied while in­vest­ing in high fly­ing star­tups like Ola, Uber or Hous­ing.com, etc. It re­minds us of the Prime Min­is­ter’s words ear­lier this year when the Startup In­dia pro­gram was launched. He had said, “Startup does not only mean soft­ware or eCom­merce ven­ture.”

In the short term, Flip­kart’s marked down val­u­a­tion might po­ten­tially harm the in­ter­ests of the startup com­mu­nity. But it is not as bad a news as it seems. It can now be hoped that most of the funds would not sit around eCom­merce ven­tures in In­dia. There would be fo­cus on star­tups and ven­tures which have de­vel­oped in in­no­va­tive prod­ucts. www.dqin­dia.com 27

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