There is a growing sense of uneasiness within the Flipkart investors as they realize India’s top e-commerce firm to be overvalued. It is still to be seen by how much margin.
American mutual funds Fidelity Rutland Square Trust II and Valic Co. have joined US asset management firm T. Rowe Price and Morgan Stanley in reducing the value of their investments in Flipkart.
According to filings with the Securities and Exchange Commission, the mutual fund managed by Fidelity Investments lowered the value of Flipkart shares it owns by almost 40% to $82 apiece as of 29 February 2016 from $135.8 in August last year. Valic marked down the value of its investment in Flipkart by 29% to $98.19 a share from $139 apiece.
In February, global brokerage firm Morgan Stanley had marked down its stake in the Indian e-commerce behemoth Flipkart by 27 percent. The mutual fund, called the Institutional Fund Trust Mid Cap Growth Portfolio, marked its stake in Flipkart at $103.97 per share.
T. Rowe Price slashed the holding value of its investment in Flipkart by 15.1% in its report for the quarter through March 2016.
None of the four firms have given a rationale for the valuation. Lowering valuation of Flipkart hasn’t come as a shocker to industry observers. Market observers have been anticipating correction in valuation of privately held Internet companies.
The markdowns come at a time when Flipkart is reportedly trying to raise more funds amid an intense battle with SoftBank-backed Snapdeal and the local arm of Amazon.com Inc to maintain its supremacy in the Indian e-commerce market.
After that funding galore in the initial years, things in the investment domain have started to slow down from past few years — specially Q4’15. Investors are now looking for a sustainable business model and profitability rather than just initial disruption through technology.
Flipkart also counts Tiger Global Management, Naspers, Accel Partners, Iconiq Capital, GIC, DST Global and Sofina Societe, among others, as investors.
Few financial experts opine that investors in Flipkart, Snapdeal and others would look to exit from these companies in the course of next two to three years.