India’s unicorn Flipkart has suffered yet another markdown from two of its American Mutual Fund investors Fidelity and Valic. This is the second time this year that the investors have cut the valuation of the Bangalore-based company.
In a filing with the US Securities and Exchange Commission (SEC), Fidelity Investments lowered the value of its Flipkart shares by 3.2 percent, while Valic slashed the worth of its investment by a harsh 11.3 percent.
Specifically, Fidelity slashed the value of Flipkart shares from $84.29 in May to US$81.55 in August. Valic cut down the valuation from $108 in May to $95.84 for the same period. Flipkart did not respond to an email query sent by Tech in Asia.
This is the eighth time that Flipkart has been marked down by its investors. With this markdown, Fidelity values the company at US$8.71 billion, and Valic positions the Indian e-commerce giant at US$10.24 billion.
In February, Fidelity lowered the value of Flipkart shares by almost 40 percent from US$135.8 to US$82 a share in August 2015, and Valic had brought down the valuation by 29 percent from US$139 a piece to US$98.19. During the February markdown, Flipkart was valued at US$8.80 billion and US$10.50 by Fidelity and Valic respectively.
But the same investors raised Flipkart’s valuation in August, pegging the company’s worth at US$9 billion and US$11.5 billion.
In the same month, Flipkart was marked down by Morgan Stanley which eroded its valuation for the third time by 4 percent, at US$9 billion.
Mutual funds managed by Morgan Stanley and T. Rowe Price have also slashed their valuation of the company twice; while Vanguard Group, Fidelity, and Valic have each lowered the value once before as well.
Even though the markdowns are expected to impact the company’s fundraising efforts, Flipkart founder Sachin Bansal is dismissive of it. In July, after Morgan Stanley and T Rowe cut the company’s valuation, Bansal called it a ‘purely theoretical exercise’.
“I do not think anyone’s valuation has changed just because somebody or small shareholders of these companies have changed their opinion,” he said.
Flipkart’s previous valuation when it raised funds was close to US$15 billion. Since then, the company hasn’t raised fresh funds, which stagnates the valuation. But these markdowns can change that. Investors will take into account the valuation of the company stated by these mutual fund investors to determine the amount of capital infusion. Basically, Flipkart will not be able to raise funds at a valuation higher than the US$15 billion valuation.
The markdowns come at a time when Flipkart is said to be in talks with the world’s largest retailer, Wal-Mart Stores Inc., to raise funds worth US$1 billion. Flipkart has been struggling to maintain a leadership position in the Indian ecommerce market in the face of fierce competition from Amazon.
Both Valic and Fidelity were part of the $360Million Series D round, which Flipkart raised in 2013. Valic invested again in March 2015. They together own about $6 million of Flipkart shares.
Flipkart’s other investors include Tiger Global Management, Naspers, Accel Partners, Iconiq Capital, GIC, DST Global and Sofina Societe.
Global competition from Amazon has been haunting not only Flipkart, but also Snapdeal, which recently rehashed its branding for wider appeal. Snapdeal was also marked down, along with Ola, by Japanese investor SoftBank in its consolidated earnings for the six months period ending in September.