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Morgan Stanley Marks Down Stake In Flipkart By 27%, Valuation Down To $11 Billion

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A mutual fund of the global brokerage firm Morgan Stanley has marked down its stake in the Indian e-commerce behemoth Flipkart by 27%. The mutual fund, called the Institutional Fund Trust Mid Cap Growth Portfolio, marked its stake in Flipkart at $103.97 per share.

It is 27% less than the last funding round by Flipkart and saw a significant decline when compared to $142.24 per share as of June 2015 and $117.96 per share as of December 2014. This was recently disclosed in the filing of the fund and was first brought to notice by The Information.

Flipkart is not the only tech startup though, in which the fund has cut down its stake. Many other top Silicon valley tech-startups continue to face the heat of decreasing investor sentiment in tech startups.

American software and services company Palantir Technologies for example, which is valued at over $20 billion also saw its stakes coming down by 32% from $11.38 per share to just $7.70 per share. The fund also marked down its stake in popular file hosting service Dropbox by 25%.

Although the scenario is comparatively more grim in the Valley where investors have become extremely cautious when it comes to tech startups, the situation is only marginally better back at home here.

After that funding galore in the initial years, things in the investment domain have started to slow down from past few years — specially Q4’15. Investors are now looking for a sustainable business model and profitability rather than just initial disruption through technology. An due to the sentiment that prevails, more and more investors are now looking for profitable exits from companies, even though their investment period hasn’t really been that much.

The result ? Well, this has led to consolidations and acquisitions (TaxiForSure and Ola Cabs, CarWale and CarTrade, FreeCharge and Snapdeal, Commonfloor and Quikr, etc); partial and permanent shutdowns and layoffs (TinyOwl, Foodpanda, etc); and the renewed focus of established upstarts on profitability.

Amidst this scenario, Flipkart, despite raising more than $3.5 billion in venture capital funding so far, hasn’t been unaffected. Before the recent marking down of stakes by Morgan Stanley, other investors such as Accel Partners, IDG Ventures, have also reportedly sold their stake in the company. As for fresh investments, the company is facing tough questions, revolving primarily around that bloated valuation.

Reports had earlier surfaced regarding Flipkart approaching Chinese e-commerce giant Alibaba for fresh funds. However, as has largely been the trend in this ecosystem for long, Flipkart’s valuation was acting as a thorn in the flesh. But considering how Morgan Stanley’s marking down has brought down the valuation significantly — $15 Billion earlier to $11 Billion now, Alibaba might reconsider its options.

In addition to this, the company is also in the aftermaths of major management exodus — the most recent of them being quitting of Myntra co-founder Mukesh Bansal and chief business officer Ankit Nagori, preceded by change of guard at the CEO level.

Edited by Deepanshu Khandelwal with additional inputs.

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