Flipkart, India’s e-commerce poster boy, continues to see smaller markdowns from investors and mutual funds, as Fidelity in its latest filings has valued the e-commerce major at $5.38 billion. This valuation drop comes amidst the backdrop of Flipkart recently raising $1.4 billion of funding at a valuation of $11.6 billion. Of the three US-based mutual funds who filed their quarterly filings with the US regulator, Security Exchange Commission (SEC), on Friday, two—Fidelity and Valic—slightly marked down their Flipkart holdings, while the third mutual fund investor, Vanguard, valued its holding at a constant price to what it had marked last quarter.
Fidelity has lowered the valuation of its holding in Flipkart by 3%. The mutual fund company which holds more than 5 lakh Flipkart shares valued its holding at $50.51 per share in its semi-annual report for the period ending February 28, 2017, down from $52.12 during the November 30 ending quarter. Even Valic marked its holdings from $95.84 during November, 2016 to $94.27 in February 28, 2017.
Though there was some respite for Flipkart as Vanguard World Fund, which holds 4.7 lakh shares in the e-commerce company, maintained its valuation at constant price of $68.73 each share during both November and February quarter. However, Flipkart has been maintaining that this markdown doesn’t matter to them. Its latest round of funding had three key investors—Tencent, Microsoft and eBay. The e-commerce once enjoyed a peak valuation of $15.2 billion.
Flipkart COO Nitin Seth in an earlier interaction with fe had said, “The notion of markdown is very incorrect. The only time when the share price changes is when there is an investment in the company, that is, when there is a financial transaction. What various investors do is simply do a theoretical exercise. These mutual funds own very small holdings of our company. They have access to very limited information about the company given that their holdings are very marginal. And based on that they end up doing some kind of theoretical valuation that has no bearing on the actual stock price of the company.”
While Flipkart doesn’t agree with markdowns from mutual funds, it recently promised its employees to issue additional stock options to them to whom ESOPs were allotted when its valuation was higher than the one established in the latest funding round. This was being done to ring-fence the ESOPs from a drop in the share price.
In the email to employees, who are part of the ESOP programmes of Flipkart, group CEO Binny Bansal said the additional grant was being made so that the total dollar value of shares allotted to employee remains unchanged after the recent round of funding.
-Sameer Ranjan Bakshi