Flipkart continues to face heat from investors. Once again, two of its mutual fund investors, Fidelity Rutland Square Trust II (managed by Fidelity Investments) and Valic Co, have marked down their stakes by 20% giving another blow to its valuations and its plans of raising funding on own conditions.
According to a report in the ET, Fidelity marked the value of its shares in Flipkart at $82 per unit for the February ended quarter. This was 21.1% down from $103.97 per unit from November 2015. Valic, on the other hand, has marked down the value of its shares from $123.11 in November to $98.19 per unit in February.
This is the third instance of share mark down for the ecommerce giant, within a span of three months. The first one, and the major blow was from a fund managed by Morgan Stanley which marked down its stake by 27% in February. Last month came a 15% markdown by a mutual fund managed by T Rowe Price.
However, it is not the first time Fidelity and Valic have marked down their shares in Flipkart. They had previously marked down their shares in the company by 24% and 12% respectively in the last quarter.
Both mutual funds had participated in Flipkart’s Series D round, when it raised $360 million in two tranches. After this latest mark down, the valuation of Flipkart is being pegged anywhere between $9.2 and $10.7 billion. This is much lower than its previous $15 billion number on the basis of which the company wants to raise fresh capital.
And since analysts have always been skeptical about its $15 billion valuation, often calling it an inflated number, it will be an uphill task for Flipkart to raise new funds on that valuation. Reportedly, Flipkart even approached Alibaba which backs its rivals Snapdeal and PayTm, for funds, but the Chinese giant refused to invest at current valuation.
Some investors are also concerned about the continued exit of senior employees from Flipkart despite many new appointments made by the company. After Binny Bansal took over as CEO this year and the major restructuring of divisions in the company, important names have left the company.
These include exits of Myntra founder and head of commerce division at Flipkart, Mukesh Bansal; Chief Business Officer Ankit Nagori and Chief Product Officer Punit Soni.
However, amidst doubts on its capability to raise funds on its own conditions, according to industry estimates, Flipkart has enough funds to carry on its operations for another 18 months so it might not go for a down round too soon.
But at the same time, keeping in mind the increasing competition from Amazon which has been pumping money into India like anything, Flipkart may have to take a decision soon on the matter.