A little over a month after two US-based investors Morgan Stanley and T Rowe Price devalued India’s largest e-commerce company Flipkart by 27% and 15% respectively, two more investors have joined the chorus.
According to the regulatory filing with the US Securities and Exchange Commission (US SEC), Valic Co 1 wrote down Flipkart’s value by 29%. Valic had valued Flipkart’s Series D stock at $98 a share in February 2016, down from $139 a share in August last year.
Meanwhile, Fidelity Rutland Square Trust II has written down the country’s e-commerce giant by as much as 39.6%. Fidelity valued Flipkart’s Series D stock at $82 down from $135.8 a share over the same period.
According to a report in Mint published last month, Flipkart has been in talks with more than 15 investors over the last six months to raise fresh capital, all of whom reportedly disagreed with the company’s self-valuation of $15 billion. The company last raised $700 million in July 2015 at this valuation.
An e-mailed query to Flipkart on this development did not get any response.
The recent write-down of Flipkart’s valuation is not unique to the company. One of its main competitors in India, Snapdeal, has also been struggling to convince new investors that it should be valued at $6.5 billion, according to another report by Mint. After two years of uninterrupted and free flow of investments in the Indian e-commerce businesses, investors are now tightening their purse strings and also imposing stringent cost-cutting measures.
It is also been widely reported that Flipkart’s new CEO and its co-founder Binny Bansal has considered cost-cutting has one of his major priorities since he took charge in January this year.
As per media reports, Fidelity and Valic hold very small amounts of Flipkart stock. Their holdings together are worth less than $6 million, which is a minuscule fraction of Flipkart’s overall value.
However, the markdowns, including that from minority stakeholders Morgan Stanley and T Rowe Price, which together own almost $100 million of Flipkart stock, confirms the view that Flipkart’s own investors believe the company is overvalued significantly.
Earlier this week, Flipkart’s co-founder and executive chairman Sachin Bansal acknowledged challenges faced by not just his company but most internet-based businesses in raising fresh funding.
“A lot of times people look at a down round (reduction in valuation) negatively and it is not a pleasant situation for any company, but the fact is that almost every Internet company around the world goes through it,” Bansal said. “In long term, all these things wouldn’t matter. I would therefore keep my head down and keep executing. If the business needs funds, raise the minimum possible at the available terms and move on.”