In a move that could raise some red flags for potential investors in India’s largest e-commerce firm Flipkart, one of its existing investors Morgan Stanley has marked down the valuation of the company in its books by nearly 38 per cent to $52.13 per share at the end of September-quarter. This is compared with the last reported valuation of $84.29 apiece at the end of June-quarter. With this markdown, the mutual fund values the company at $5.54 billion.
In a filing made with the US Securities and Exchange Commission on Tuesday, the mutual fund Morgan Stanley Select Dimensions Investment Series, which also holds interest in other internet companies such as Twitter, Dropbox, LinkedIn, marked down the value of Flipkart’s 1,969 shares it holds to $102,644.
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Flipkart Internet, the company which operates the online commerce platform of Flipkart.com, last week reported a net loss of Rs 2,306 crore for the year ended March 31, 2016, according to company’s filing with the registrar of companies. The losses doubled from Rs 1,096 crore during FY15.
Since the last six quarters, the mutual fund has marked down the value of Flipkart’s share in its books by almost 63 per cent. The fund valued Flipkart’s stock at $142.24 apiece in its filing for the quarter ended June 2015. As per the June 2015 value of Flipkart’s share by Morgan Stanley, the company was valued at $15.12 billion.
However, the company’s management, on previous markdown instances, has dismissed these exercises as theoretical ones, and suggested that the company’s true valuation would be known only once the company raises more funds from existing or new investors. The development comes at a time when Flipkart is reportedly in talks with US retail giant Walmart Inc to raise funds through investment. In October, two of the company’s other existing investors — Fidelity Rutland Square Trust II and Valic Co I — had reduced the valuation of their holding in the Bengaluru-based firm by 3.2 per cent and 11.3 per cent, respectively.
With these markdowns, Flipkart’s total valuation reduced to $8.7 billion against $9.0 billion as per Fidelity’s numbers, and to $10.2 billion from $11.5 billion according to Valic Co’s numbers. Incidentally both these investors had, in the previous three-month period, increased Flipkart’s valuation in their books. Apart from Fidelity Rutland and Valic Co, another Flipkart investor Vanguard Group has also made a filing with the US securities regulator, it has maintained the valuation of its holding in the company during the June-August quarter.
Based on its previous valuation markdowns, sector analysts had suggested that growing concerns from investors signal a call for change in the current growth-oriented but loss-making business models of e-commerce companies. In June, Flipkart made an effort to ramp up its revenues and pare its losses by increasing the commission it charges the sellers on its marketplace by 5-6 per cent across several segments such as fashion and mobile accessories.