Morgan Stanleys cuts Flipkart’s value by 4 billion dollars

Morgan Stanley, a key investor in India’s largest e-commerce site Flipkart, has marked down its investment value. Now Flipkart stares at a drop in its 15 billion dollar (Rs 10,206.75 crores) valuation. In December, Morgan Stanley’s valuation in Flipkart was 58.9 million dollar ( Rs 40.09 crores), which was down 27 per cent since June 2015.

This is part of the 3.15 billion dollar (Rs 2,143.42 crores) that the Indian e-commerce giant has raised so far. Plans to raise more funds could be down round as investors could benchmark Flipkart at 11 billion dollar (Rs7487.69 crores), which is the value that the US mutual fund has set. This comes at a time when Flipkart is facing stiff competition from Amazon and Chinese e-commerce giant Alibaba which is making investment in Snapdeal and Paytm.

Haresh Chawla partner at venture capital firm India Value Fund believes that the valuations were hyperinflated in the first place. And it was a matter of time before ‘reality struck’.

In 2015, Indian start-up raised nearly 5 billion dollar (Rs 3,402.25 crores)with global investors such as Tiger Global and Japan’s Softbank invested aggressively. Once the global funds slowed down their investments, the startups started tightening their belts to show value in their business.

In February, Snapdeal’s valuation increased to 6.5 billion dollar (Rs 4,422.92 crores) after it raised 200 million dollar (Rs 136.11crores) from the Ontario Teachers’ Pension Plan among others. The total gross merchandise value (GMV) among Flipkart, Amazon and Snapdeal was 13.5 billion dollar (Rs 9,189.44 crores), with Flipkart having the lion’s share at 45 per cent. As Morgan Stanley stated in its report, that the ‘e-commerce market was dominated by the three large general merchandise companies in 2015 with a combined GMV market share of 83 per cent. Snapdeal, Amazon and Paytm have all raised their competitive intensity to close the gap with Flipkart’.