Another tornado hits the domestic eCommerce giant Flipkart as two of its mutual fund investors have further marked down the value of their holdings in the company by upto 20 per cent.
Fidelity Investments- owned Fidelity Rutland Square Trust II has marked the value of their Flipkart shares at $82 per unit for the February ended quarter, down 21.1 per cent from $103.97 per unit assigned to them at the end of November 2015.
Valic Co, the second investor, has marked the value of their Flipkart shares at $98.19 per unit for the February ended quarter, down 20.2 per cent from $123.11 assigned to them at the end of November 2015.
This is not the first time that the two mutual fund investors have lowered their valuations. Fidelity and Valic had earlier marked down their holdings in the company by 24 per cent and 12 per cent respectively in the previous quarter.
The markdown once again pegs Flipkart’s valuation between $9.2 billion to $10.7 billion, as compared to the $15.2 billion when it last raised capital in July 2015.
The move is expected to come ahead of Flipkart’s earlier markdowns which includes 15 per cent by T Rowe Price-managed mutual fund last month and a 27 per cent cut by Morgan Stanley-backed mutual fund in February this year.
Valic and Fidelity had picked up shares in Flipkart as a part of its series D round of funding in 2013, when the India's largest e-commerce player had raised $360 million in two tranches.
Amid these valuation cut-downs it will now get difficult for Flipkart to raise further funds at its preferred valuation. This will surely push the eCommerce giant on the back foot in its current fundraising discussions with investors.
However, the homegrown eRetailer has managed to maintain a pole position in the Indian eCommerce horizon competing with rivals such as Amazon Indian and Snapdeal. Flipkart has been trying to crack a new round of funding since 2015 while Amazon has already infused a sum of 6,700 cr since January 2015 with over half of the amount being invested in December.
Taking about these valuation hiccups at TiE Delhi-NCR organized India Internet Day, Group Chairman Sachin Bansal said that a lot of times people look at a down round negatively and it is not a pleasant situation for any company, but the fact is that almost every Internet company around the world go through it.
In 2012, Flipkart raised at a billion (dollar valuation) and $750 million after that. A lot of times financial cycles govern this and even today we are seeing some of that happen, he added.
Extending his thoughts on the topic Bansal also said that the way he thinks about it is to keep business interests ahead of everything else. One need to make sure that the business is well capitalized and it is grows at a healthy pace.