Photographer: Dhiraj Singh/Bloomberg

Latest Flipkart Markdown Does Not Bode Well for Indian Unicorns

Flipkart Online Services Pvt, Amazon Inc’s biggest rival in India, has been marked down for the fifth time in a row by a Morgan Stanley mutual fund even as other signs indicate that India’s unicorns cannot maintain their lofty valuations in the contracting funding environment.

The fund marked down the value of its holding in India’s largest online retailer by 38.2 percent to $52.13 per share in the September quarter, from $84.28 per share in the previous quarter ending in June, according to the fund’s filing with the U.S. Securities and Exchange Commission.

Flipkart last raised funds in the summer of 2015 when it was valued at $15.2 billion. The Morgan Stanley mutual fund has cut its estimated share price by 63 percent since that time, implying a valuation of less than $6 billion. Flipkart’s investors include Tiger Global Management, SoftBank Group Corp. and Accel.

"Mutual fund mark-to-market is a purely theoretical exercise and is not based on any real transactions,” Flipkart said in an e-mailed statement. “We are seeing a strong traction in our business momentum and operating performance.”

Flipkart is in talks with investors to raise a fresh round as it seeks to keep its lead in the intense fight with Amazon, a person familiar with the matter said in September. Amazon earlier this year said it is adding $3 billion to its earlier India kitty of $2 billion.

India’s unicorns like Flipkart and ride-hailing startup Ola face challenging times as they seek to raise funds to take on their giant global rivals, Amazon and Uber Technologies Inc. ANI Technologies Pvt.’s Ola is seeking funds at 40 percent lower valuation than a year earlier, a person with direct knowledge of the matter said last week.

The series of markdowns forebode lower valuations all round. SoftBank, earlier this month, announced a 58.1 billion yen ($513 million) investment loss, mainly on its assets in India. SoftBank’s investments in the country include Ola and Jasper Infotech Pvt.’s Snapdeal.

Such markdowns could be on account of investors seeking to show losses to reduce taxes, said Neha Singh, chief executive officer of startup research consultancy Tracxn. “Investors are extremely bullish on India as the market is still galloping.”

“However there is a premium on the valuation of a market leader and the premium reduces as the lead erodes,” Singh said.

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