CHENNAI: Flipkart witnessed yet another markdown of its valuation on Wednesday, with a mutual fund managed by Fidelity Investments marking down the value of Flipkart shares it holds by more than a third.
However, analysts say that the markdown is not likely to affect the company’s plans of securing funds, primarily due to better clarity in business structure and improving metrics in the last few months. The change in management, with Kalyan Krishnamurthy taking over as CEO, has also brought in more direction.
According to U.S. Securities and Exchange Commission data, Fidelity Rutland Square Trust II, which invested in Flipkart in 2013, marked down the shares it holds by 36 per cent to $52.13 on November 30, 2016.
The markdown pegs valuation, which hit $15.2 billion during its last round of fundraising in 2015, at just $5.58 billion. This is not the first markdown Flipkart has faced recently.
In November, a mutual fund managed by Morgan Stanley made its fourth consecutive markdown, slashing valuation by 38 per cent, at $5.54 billion. Other investors have also gone ahead with similar markdowns over the previous year, including Fidelity and T Rowe Price.
While the markdown comes at a sensitive time for Flipkart, which is reportedly in talks to raise another round of funds at its peak valuation of $15.2 billion, the year has not been good for most e-commerce players.
“2016 was not a great year for India e-commerce sector with no acceleration in revenue growth, cutting down discounts to focus on unit economics; and companies struggling to raise funding,” it pointed out, “For 2017, with improvement in telco infrastructure (4G/fixed broadband), handset penetration and affordable tariffs... we expect the number of online users to accelerate,” stated a report from Bank of America -- Merrill Lynch, also pointing out that “the growth expectation mismatch for investors has become a reality check and we should see more realistic valuations.”
But such markdowns fluctuate from time to time and metrics are getting better. “The industry and leaders are maturing in business models today.
Most or all of the matrices which would have contributed to high valuations earlier have further grown/improved today — average order value, orders per day, new customers, margins for most categories as well as logistics cost,” said Sreedhar Prasad, Partner, Internet Business, KPMG.