Flipkart valuation markdown continues

Two mutual funds investors at Flipkart – Valic Co and Fidelity Rutland Square Trust II – have marked down their value of holdings in the e-commerce giant, as reported by media reports on Wednesday.

Fidelity Rutland Square Trust II, funded by Fidelity Investments, valued Flipkart’s Series D stock at $82 a share in February, down from $103.97 per share assigned by them in November and from $135.8 per share in August 2015.

Valic Co valued Flipkart’s shares at $98.19 per share in February, down from $123.11 per share in November and $139 per share in August 2015.

Making it the second consecutive markdown after their last investment in July 2015, the holdings of Fidelity and Valic is worth less than $6 million of Flipkart’s stock, which is a minor part of Flipkart’s overall value. Mid-last month, mutual fund T Rowe Price marked down its shares of the company by 15 per cent, which they invested in the firm in December 2014.

However, the biggest hit was in February this year. Morgan Stanley, a mutual investor in Flipkart, had marked down the value of its holding by 27 per cent, valuing its shares at $103.97 per share as of December 2015, down from $142.24 per share as of June 2015.

Earlier media reports suggested that the Flipkart has started to talk with investors to raise about $1.4 billion (Rs 9,200 crore) from US-based Sands Capital Management leading the round. However, these marketplaces (including Snapdeal) are unable to raise funds at their preferred valuations.

Flipkart’s tight management situation

Situations seem to be a little tight with Flipkart, with some big management rejigs happening over the past few months. In January, Sachin Bansal stepped down as the CEO of Flipkart, with Mukesh Bansal, Chairman of Myntra and Head of Commerce at Flipkart, leaving the company along with Chief Business Officer Ankit Nagori.

Few days later, Manish Maheshwari, who was heading the seller business, left to take over as the CEO of Network 18, followed by Punit Soni, Flipkart’s Chief Product Officer, reportedly quitting the company last month.

Calling it a theoretical exercise and not a transactions based one, for Sachin Bansal, markdowns by Morgan Stanley and Mutual Fund T Rowe Price wasn’t much of a concern.

Speaking at the India Internet Day 2016 event in Gurgaon, he said

I do not think anyone’s valuation has changed just because small shareholders of companies have changed their opinion. I do not worry too much about that.

He further added

If we don’t want to raise funds, it does not matter what other people think. If we do need to raise funds, (we'll raise) whatever is available and move on. In the long term, things will take care of themselves. Things will keep changing and we should not fool ourselves thinking that it will remain constant and remember a downturn would come again.

This is true since it was reported that T Rowe also cut the value of its stakes in Uber, which continues to be high on venture backing. Further, to prove the theoretical exercise, Fidelity Investments marked down its holdings in Snapchat towards the end of last year, revaluing it and marking it up this year.