Valuation dip? No sweat, says Flipkart

Co-founder does not worry 'too much' about markdown

Sachin Bansal, co-founder of Flipkart, does not worry ‘too much’ about the drop in valuation of the company. For him, the mark-down in the valuation by Morgan Stanley and Mutual Fund T Rowe Price is a "theoretical exercise" and not based on any transaction.

At the India Internet Day 2016 event, where Bansal was one of the speakers, he said he does not think his company’s valuation has changed. “See what is happening with T Rowe Price and Morgan Stanley across the world and it is the same with other companies as well; it is a very theoretical exercise and not based on any real transaction that have happened in this space." He added, "So I do not think anyone’s valuation has changed just because somebody or small shareholders of these companies have changed their opinion. I do not worry too much about that."

In February this year, Morgan Stanley marked down its stake in Indian e-commerce company to $103.97 a share, 27 per cent below the price of its last fund-raising round. The move came days after Flipkart claimed it was valued at a whopping $15.2 billion.

In 2015, Morgan Stanley had valued Flipkart a little over $142 a share. The fall reduced Flipkart’s valuation to $11 billion. According to a US Securities and Exchange Commission filing, Morgan Stanley valued its Flipkart stake at $58.93 million in December 2015, compared to $80.62 million in June 2015.

Earlier this month, mutual fund T Rowe Price followed suit and cut the value of its stake in the Sachin Bansal and Binny Bansal-led company by 15 per cent, becoming the second investor to mark down the online retailer’s estimated worth.

To be fair to Flipkart, T Rowe also cut the value of its stakes in Uber, which is arguably the world’s most valuable venture-backed company.

According to market experts, T Rowe’s markdown implies it values Flipkart, India’s most valuable e-commerce firm, at $12.75 billion.

The company was valued at $15 billion when it raised $700 million from Tiger Global Management and other existing investors last June. After the second markdown, experts said it was yet another confirmation that the e-commerce giant was overvalued.

Bansal went on to say it does not matter what people think. “If we do not need to raise funds, it does not matter what other people think. If we do need to raise funds raise, (we'll raise) whatever is available and move on. In the long term, things will take care of themselves. Good times do not last forever and bad times don’t either. Things will keep changing and the learning we should take from this is when the good times come again - and they will - we should not fool ourselves thinking that it will remain constant and remember a downturn would come again.”

Bansal added that 2012 was the toughest year for his company, when Flipkart had to go for a 'down round' of funding. He said the delay in raising money on hopes of better valuations was a wrong business call. When investors purchase stake or shares in a company at lower valuation than what the company was previously valued at, is a called a down round.

“It was the toughest time for us. We were hoping that if we delay raising funds that was available, we'd be able to get a better valuation. However, Flipkart had to raise funds at valuations of $750 million compared to $1 billion in the round before it,” he said. In August 2012, Flipkart raised Series D funding of $150 million from MIH (part of Naspers Group) and ICONIQ Capital.

Bansal also said he was not thinking going public any time soon. “Right now the markets are growing pretty fast and we don't need to raise funds. The biggest reason to go public would be to tap into the public market. But, we'll take a call at the right time. At present, we do not need to,” he said.