Morgan Stanley Slashes Flipkart’s Valuation By 38 Percent

Flipkart Online Services in Bangalore, India (Photo: iStock)

India’s largest online marketplace Flipkart has seen yet another valuation markdown by one of its investors. On Tuesday, a Morgan Stanley managed mutual fund marked down the value of its holding in Flipkart by 38.2 percent to $52.13 a share, down from $84.29 a share in the June quarter, according to the fund’s filings with the US Securities and Exchange Commission (SEC).

The mutual fund, Morgan Stanley Select Dimensions Investment Series, currently holds 1,969 shares in Flipkart that are collectively valued at $1,02,644.

Flipkart’s current valuation after the latest markdown stands at $5.54 billion – the lowest since September 2014.

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The company’s valuation when it last raised capital in July was $15.2 billion.

This also marks the fourth valuation markdown in the last nine months and the largest by Morgan Stanley to date. In the last markdown in June this year, the fund had cut Flipkart’s valuation by 4.1 percent, pegging it at $9 billion. In May, it slashed the value of its stake by 15.5 percent. The second highest markdown so far came in February when Morgan Stanley slashed the value of its Flipkart shares by 23.4 percent to $87.9 per share as of 31 March, from $103.97 per share as of 31 December 2015.

Morgan Stanley’s valuation of its Flipkart shares. (Photo: Morgan Stanley Select Dimensions Investment Series/ BloombergQuint)

It is not just Morgan Stanley that has marked down the valuation of India’s most valuable e-commerce company. Earlier this month, two other investors in Flipkart – Fidelity Rutland Square Trust II and Valic Co – lowered the value of shares they own by 3.2 percent and 11.3 percent respectively for the quarter-ended August.

The latest markdown comes at a time when Flipkart is reportedly in talks to raise fresh funds.

American asset management firm T Rowe Price has slashed the e-commerce company’s valuation twice in the past whereas Vanguard Group, Fidelity Rutland Square Trust II, and Valic Co have each lowered the value of their shares once before.

Other investors in Flipkart include Tiger Global Management, Naspers, Accel Partners, Iconiq Capital, and DST Global.

In an email response to BloombergQuint, Flipkart said, “Mutual fund mark-to-market is a purely theoretical exercise and is not based on any real transactions. We are seeing a strong traction in our business momentum and operating performance. We continue to be focused on innovating for the customer, growing the market and executing on our long-term growth agenda.”

2016 has been a tough year for India’s consumer internet companies. Firms are struggling to raise capital at existing valuations and have suffered multiple markdowns in their valuations.

In September, SoftBank marked down the value of its two Indian investments, e-commerce marketplace Snapdeal and cab-hailing firm Ola.

Markdowns are very much in the nature of the business, said Ben Mathias, managing director of Vertex Ventures in a telephonic interview. Vertex Ventures is the venture capital arm of Singapore state investment firm Temasek Holdings.

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These are all paper numbers and the only valuations that matter is when the company goes public or when it is sold. The industry is still young in India and people haven’t seen these cycles before. In Silicon Valley, markdowns or markups are a fact of life. When it happens in India it tends to makes headlines.

Ben Mathias, managing director of Vertex Ventures

(This article was first published on BloombergQuint)