Amid rising concern over business models of Indian e-commerce companies, a Morgan Stanley mutual fund has marked down the price of its shares in Flipkart Online Services Pvt Ltd by 15.5 per cent, taking the online retailer’s value in its books to below $10 billion. Morgan Stanley Institutional Fund Inc, in its disclosure to the US Securities and Exchange Commission, has marked the value of their Flipkart holding to $87.86 per share as of March 31, 2016, down 15.5 per cent from $103.97 per share as of December 31, 2015 and down from $142.24 apiece as of June 30, 2015. The latest exercise values Flipkart at $9.39 billion, compared with a $15.2-billion valuation it had as per its latest fund-raising round in June. Even as experts have said that it’s about time e-commerce companies take a good look at their business models, which focuses on long-term growth at cost of losing money in the shorter term. For Flipkart, which is pegged to be India’s poster boy of start-ups, this is not only the second consecutive mark down in valuation by Morgan Stanley but also the fifth mark down since January. An e-mail query seeking Flipkart’s reaction on the latest development did not elicit any response. Earlier this month, Flipkart saw two of its shareholders — Valic Co 1 and Fidelity Rutland Square Trust II — marking down its valuations by 29.4 per cent and 39.6 per cent, respectively. At the calculations of Valic Co 1 and Fidelity Rutland Square Trust II, Flipkart was valued at $10 billion and $9 billion, respectively. This succeeded Morgan Stanley and T Rowe Price reducing Flipkart’s values in their own books earlier this year. After Morgan Stanley and T Rowe Price reduced their valuations, Flipkart co-founder Sachin Bansal had called it a “theoretical exercise” that was not based “on any real transaction in the space”. “It is a theoretical exercise, which is not based on any real transaction in the space. We do not think valuations change because some small shareholders have changed their opinion. We do not worry too much about this. If we do not need to raise funds, it is not important what others think. In the long term, things will take care of themselves. Good times do not last forever and bad times don’t either. Things will keep changing and the learning we should take from this is when the good times come again — and they will — we should not fool ourselves thinking that it will remain constant and remember a downturn would come again,” Bansal had said at a recent event. Industry analysts have said that while the companies may be quick to dispose these developments as theoretical, such an exercise brings realism into the investing community, and whether the companies like it or not, it is a reflection of how the investors view the businesses.
