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Another Flipkart markdown, Vanguard Investment slashes its share value by 25%

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In yet another markdown (sixth this year precisely), US-based Vanguard Investment has marked down its share value in Flipkart by 25%. The US-based mutual fund marked its share value in Flipkart at $102.6 at the end of March 2016. This was down from $136.87 in December 2015.

This latest markdown has pegged the valuation of Indian e-commerce behemoth at $11.4 billion. And yet again it is less than the $15 billion mark at which Flipkart had raised funds last time in July 2015. On the brighter side though, it is better than the $10Bn something it received durign the last markdown.

However, Vanguard Investment holds a very small share of the company which stands at less than $6 million. While Flipkart can find little solace in this fact, the regular markdowns by investors this year cannot be a good sign.

Just a theoretical exercise or something more?

It won’t be surprising if Flipkart remembers this year mainly as the year of markdowns among other issues which have plagued the company. With the latest by Vanguard Investment, the number has gone up to six in six months. It all started when Morgan Stanley managed mutual fund marked down its share value by 27% in February.

This was followed by another big investor T-Rowe Price which reduced its share value by 15% in April. More blows came in the month of May when Morgan Stanley once again marked down by 15.5 %. In the same month, two other funds, Fidelity and Valic further slashed down their share value by 20% in the company.

Flipkart, however, has refused to give any importance to these constant markdowns. Flipkart CEO Binny Bansal had called these markdowns “mostly a theoretical exercise by small investors”.
On questions on valuations, he had said,

From our perspective, valuation is when we raise money. When we raise money, our value will be clear in the market.

However, several media reports have suggested that Flipkart is finding it tough to raise money based on last funding valuation. And the company might have to go for a down round- i.e, raising capital at a lesser valuation than the previous round.

It had raised $700 million in July 2015 at a valuation of $15 billion- much to the skepticism of outside investors and industry experts. And that skepticism has perhaps become more evident given that Flipkart still seems to be far from profitability. Moreover, Amazon has slowly become a real threat now especially with its commitment of massive capital investment in India.

Keeping this in mind, one would think Flipkart needs to raise a fresh round of capital very soon. But apparently, that is not the case. Just yesterday, Flipkart Executive Chairman Sachin Bansal told reporters that the company was not looking to raise money.

There is always a constant effort in our company to improve operational efficiency and also growth in all aspects of business. We are well-funded for a long period of time and so we don’t need to look at it.

said Sachin.

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