Mu­tual fund Valic trims Flip­kart val­u­a­tion to $7.9 bn

Mint Asia ST - - News - BAY NIRBAN S EN

Mu­tual

fund in­vestor Valic Co. has trimmed the val­u­a­tion of In­dia’s most valu­able start-up Flip­kart, months af­ter the e-com­merce mar­ket leader raised nearly $3 bil­lion from mar­quee in­vestors led by Ja­pan’s Soft­bank, Ten­cent Holdings, ebay and Mi­crosoft —an in­di­ca­tion that some smaller in­vestors in Flip­kart are still di­vided over its val­u­a­tion.

The tim­ing of the lat­est mark­down comes as a sur­prise, given that Flip­kart has largely con­sol­i­dated its po­si­tion as In­dia’s top on­line re­tailer over the past 12 months and or­ches­trated a turn­around of its for­tunes un­der chief ex­ec­u­tive of­fi­cer Kalyan Kr­ish­na­murthy, af­ter spend­ing the bet­ter part of last year con­ced­ing mar­ket share to arch-ri­val Ama­zon In­dia.

In its lat­est quar­terly re­port, Valic marked down Flip­kart’s val­u­a­tion slightly to about $7.9 bil­lion—which is way be­low the $11.6 bil­lion val­u­a­tion at which Flip­kart raised funds ear­lier this year.

In the pre­vi­ous quar­ter, Valic had val­ued Flip­kart at roughly $8.5 bil­lion.

While tech­ni­cally Flip­kart’s lat­est fundrais­ing was a “down round” from its peak val­u­a­tion of $15 bil­lion, the fundraise was seen as a ma­jor vic­tory for Flip­kart, given its strug­gles in 2015 and the first half of 2016 when it made sev­eral strate­gic blun­ders and con­ceded sig­nif­i­cant mar­ket share to Ama­zon In­dia.

For the three months ended 31 Au­gust, Valic val­ued each Flip­kart share at $88.11, down from $94.27 in the pre­vi­ous quar­ter.

Mint had re­ported on 1 June that mu­tual fund in­vestors such as Mor­gan Stan­ley, Fi­delity In­vest­ments, Valic and Vanguard Group Inc.—which to­gether hold a small stake in Flip­kart—were still di­vided over its val­u­a­tion.

Flip­kart did not im­me­di­ately re­spond to an email seek­ing com­ment, but in the past, the on­line re­tailer has brushed aside such mark­downs.

In past in­ter­views, Flip­kart founders Sachin and Binny Bansal (not re­lated) have re­peat­edly dis­missed these mark­downs and termed them as “the­o­ret­i­cal ex­er­cises.”

“These are the­o­ret­i­cal ex­er­cises. See, we are not a pub­lic com­pany, so we don’t re­lease our num­bers pub­licly. Any in­vestor who has an opin­ion on our val­u­a­tion out­side, in­clud­ing who are al­ready in­vested in us, they are do­ing it (mark­downs) based on some pub­lic in­for­ma­tion which is ac­ces­si­ble to ev­ery­body... It’s a very un­in­formed opin­ion of some­body. So, I think it’s a the­o­ret­i­cal ex­er­cise—as we’ve al­ways said, val­u­a­tion is what will hap­pen when a real trans­ac­tion takes place and not just on paper,” said Sachin Bansal in a De­cem­ber 2016 interview with Mint.

Prior to the lat­est mark­down from Valic, Flip­kart had 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 the three months to De­cem­ber, Mor­gan Stan­ley had marked down the value of its holdings in Flip­kart for the fifth con­sec­u­tive quar­ter, while Fi­delity had slashed Flip­kart’s val­u­a­tion by over a third dur­ing the three­month pe­riod ended in Novem­ber.

To be sure, mark­downs from mu­tual fund in­vestors are not ex­pected to im­pact Flip­kart’s ac­tual cur­rent val­u­a­tion or dam­age its im­age as much as last year.

Yet, their es­ti­mates will still have sig­nif­i­cance as one of the in­di­ca­tors of Flip­kart’s cur­rent mar­ket-share bat­tle against Ama­zon In­dia and also as a barom­e­ter of the health of In­dia’s on­line re­tail mar­ket, given that bil­lions of dol­lars of in­vestors’ wealth is at stake.

HEMANT MISHRA/MINT

Los­ing value: Valic had val­ued Flip­kart at roughly $8.5 bil­lion in the past quar­ter.

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