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Two more markdowns upset Flipkart’s applecart
In what may be suggestive of a plummeting investor interest in India’s start-up segment, two mutual fund investors have marked down valuations of their investments in Flipkart. The markdowns by Fidelity Rutland Square Trust II and Valic Co present another problem to the ecommerce giant which has been dogged with similar markdowns in the recent past. According to filings with the US Securities and Exchange Commission, Fidelity Rutland Square Trust II — the mutual fund managed by Fidelity Investments — has lowered the value of Flipkart shares it owns by almost 40 percent to USD 82 apiece as of February 29, 2016, from USD 135.8 in August 2015. Valic marked down the value of its investment in Flipkart by 29 percent to USD 98.19 a share from USD 139 apiece. The latest mark-downs value India’s largest ecommerce firm at USD 9 billion and USD 10 billion, respectively. This is the second consecutive markdown from both the mutual funds. Fidelity and Valic had marked down their holdings in the ecommerce giant by 24 percent and 12 percent, respectively, in the previous quarter. Flipkart suffered a big blow earlier in February when Morgan Stanley, another mutual fund investor in the e-tailer, slashed the value of its holding by 27 percent to USD 11 billion from USD 15.2 billion. Market fund T Rowe Price followed the suit by announcing that it had cut the holding value of its investments in Flipkart by 15.1% in the quarter through March. None of the four firms has given a rationale for the valuation. In the past, Flipkart co-founder Sachin Bansal has appeared unfazed by the markdowns, terming it a “theoretical exercise, not based on any real transaction in the space”. “I do not think valuations change because some small shareholders have changed their opinion. I do not think and worry too much about this,” Bansal had said when Morgan Stanley marked down the firm’s valuation. Since the beginning of 2014, Indian start-ups have amassed more than USD 9 billion in investments. However, investors started to curb or withdraw late last year due to a couple of factors such as China’s growth slowdown and worries over business models of start-ups. These markdowns come at a time when American e-commerce company Amazon is snapping at the heels of Flipkart and local etailer Snapdeal. Analysts and investors are of the view that the American giant’s Indian unit may pip its local rivals unless they improve on their technologies, services and, more importantly, bag more investments. Charles Tapper Jersey
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