Flipkart valuation seen at $11.5 billion after Valic markup

Mutual fund investor Valic has marked up Flipkart’s share prices by 10% at $108.04 apiece at the end of the quarter ended May, as against $98.19 earlier


Valic holds a very small amount of Flipkart’s stock. Photo: Hemant Mishra/Mint
Valic holds a very small amount of Flipkart’s stock. Photo: Hemant Mishra/Mint

After successive markdowns by multiple investors, the valuation of Flipkart Ltd, India’s largest e-commerce firm, has been marked up by Valic Co., a mutual fund investor in the firm, according to a report.

Valic has marked up the value of its shares in Flipkart by 10%, valuing them at $108.04 apiece at the end of the quarter ended May, as against $98.19 in the previous quarter, according to a regulatory filing with the US Securities and Exchange Commission (SEC), The Economic Times reported.

This values Flipkart at around $11.5 billion, the report said.

Flipkart declined to comment. Mint couldn’t immediately reach Valic for a comment.

The company has always played down markdowns by investors. In an interaction with Mint on 23 May, Flipkart chief executive Binny Bansal said, “We’ve not asked them (why they have marked down the valuation). They’re very small investors. It’s a global phenomenon; it’s not specific to Flipkart. The funds have their way of (calculating valuations) which isn’t clear. If in future they markup our valuation by 30%, it’s not like we’re suddenly going to be happy. The way we look at it is that when we raise money, that’s when we get a valuation.”

To be sure, Valic holds a very small amount of Flipkart’s stock. It also was among the four funds that marked down the valuation of Flipkart in the past.

This markup comes at a time when Flipkart is chasing three key goals—gross monthly sales of Rs.3,700-3,800 crore, achieve a net promoter score, a key metric of customer satisfaction, of 55 and achieve break-even at the gross profit level by cutting staff costs, discounts and other expenses, Mint reported on 9 August.

In the past six-seven months, Flipkart’s valuation has seen multiple markdowns and one markup by Fidelity.

In July, Global asset manager T. Rowe Price Group Inc. reduced the value of its stake in Flipkart by a fifth, its second cut in four months. That valued Flipkart at $10.3 billion. The firm had earlier cut the value of its stake in Flipkart by 15% in April.

Recently, US-based investment firm Vanguard Group marked down the value of its holding in Flipkart by 22%, from $136.87 a share as on 30 September 2015 to $106.65 as on 31 March, according to regulatory filings with SEC, cutting the firm’s valuation to $11 billion.

In May, Morgan Stanley Mutual Fund Trust, a mutual fund investor in Flipkart, lowered its estimate of the online retailer’s valuation by 15.5% for the second successive quarter in a row, implying that it valued the company at $9.39 billion.

Tiger Global Management-backed Flipkart was valued at $15 billion when it last raised funds in May 2015. At that time, it was a clear market leader in the Indian e-commerce segment, ahead of the India unit of Amazon.com Inc. and Snapdeal (Jasper Infotech Pvt. Ltd).

According to a report by Mint in April, Flipkart held funding talks with more than 15 investors in the previous six months, but all of them have refused to invest in the company at its preferred valuation of $15 billion.

Currently in the Indian e-commerce scenario, Amazon is seen rapidly closing the gap with Flipkart. Amazon.com also announced an additional investment of $3 billion in India in June after the company exhausted its investment of $2 billion made in July 2014.

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