Bengaluru: US mutual fund giant Fidelity Investments slashed the valuation of its holdings in Flipkart by more than a third in November, a filing by the fund reveals, increasing the chances of an Indian unicorn having to raise money in a so-called down round soon.
A down round is a funding round where a company raises money at a lower valuation than it did in the previous one.
Fidelity’s cut is almost as sharp as the one Morgan Stanley made when it wrote down the value of its holdings in Flipkart, also in November.
Fidelity now values Flipkart at roughly $5.58 billion, similar to the $5.54 billion that Morgan Stanley last valued the Internet start-up at.
Flipkart isn’t the only Indian unicorn facing the prospect of a down round.
Cab-hailing service Ola (ANI Technologies Pvt. Ltd), another Indian unicorn (the term used for any company valued over $1 billion), is likely to raise its next round at a lower valuation than the $5 billion it was valued at in its previous round, Mint reported last June.
On Wednesday, Mint reported that Flipkart rival Snapdeal, run by Jasper Infotech, is in talks with its largest investor SoftBank Group to raise money at a valuation significantly lower than its peak valuation of $6.5 billion.
The latest markdown comes at a time Flipkart is facing a massive top-level exodus amidst an organizational overhaul and also looking to raise a fresh round of funds close to its peak valuation of $15 billion.
Mint reported in October that Flipkart was in talks with existing and new investors to raise anywhere between $500 million to $1 billion in fresh funds by the end of the current financial year.
Flipkart declined to comment on the latest valuation markdown.
In a recent interview with Mint, Flipkart co-founder and executive chairman Sachin Bansal said valuation markdowns were just “theoretical exercises” and that Flipkart was not concerned about the consecutive markdowns.
Fidelity Rutland Square Trust II, which invested in Flipkart in the Series D round it raised in 2013, has marked down the value of Flipkart’s shares by 36% to $52.13 per share as on 30 November, according to regulatory documents filed with the US Securities and Exchange Commission.
Fidelity, which currently holds 52,096 shares in Flipkart, valued its shares at $81.55 apiece during the three months ended 31 August.
The markdown from Fidelity came in the September-November period, when Flipkart actually witnessed a turnaround in its fortunes and beat arch-rival Amazon India handily during the crucial Diwali season sale.
During the Diwali season sale, Flipkart outsold Amazon by at least 20-30% to post gross sales of Rs5,000 crore for the month of October, Mint reported on 2 November.
On Wednesday, Mint reported that two more senior executives, engineering heads Hari Vasudev and Ashish Agrawal, have resigned from Flipkart this week, joining three others who left earlier this month.
Flipkart’s new chief executive officer Kalyan Krishnamurthy is now left with just three senior leaders to steer the day-to-day operations at the company, following the exits of Saikiran Krishnamurthy, the former head of Flipkart’s logistics business, marketing head Samardeep Subandh and chief product officer Surojit Chatterjee earlier in January.
The exits do not worry Krishnamurthy, an executive at a firm that has invested in Flipkart said.
“The latest reshuffle at Flipkart is good for the company—it needed someone at the helm who could inject some financial discipline into the ranks and also help pave the way for a proper exit for all investors a few years down the line,” this person said on condition of anonymity.
Another executive at a second venture capital firm that is an investor in Flipkart admitted he is worried about the marketplace’s ability to fend off a rampaging Amazon India. “At the time when we invested in Flipkart (in 2013), we did not anticipate that Amazon would rise so quickly and pose such as significant challenge,” added this person on condition of anonymity.
At least six mutual fund investors at Flipkart now value the company in the range of $5.5-10 billion.
The company last raised funds at a valuation of $15 billion nearly two years ago.