A few of Flipkart Ltd.’s investors recently raised their valuation of India’s largest online retailer, breaking a long spell of markdowns, and possibly aiding the company in seeking a close to $20 billion valuation from Walmart.
Morgan Stanley, Valic Company, Vanguard and Optimum Fund have in recent markups valued Flipkart at between $11 billion and $19 billion.
That comes after two years of aggressive markdowns, the biggest in 2016 when Morgan Stanley-managed mutual fund, Morgan Stanley Select Dimensions Investment Series, valued Flipkart at $52.13 a share or $5.54 billion.
The latest boost in valuation comes at an opportune time for Flipkart. It is in the final stages to close a deal with the world’s biggest retailer Walmart, and the e-commerce company is seeking a valuation of around $20 billion, Bloomberg had reported last month. Walmart’s looking to invest $7 billion to become its largest investor, Bloomberg reported today.
Valuations by mutual funds have a weight at the time of fund-raising, said Amit Jindal of Felix Advisory, a transaction advisory and risk management firm. “How a mutual fund values, and the projection shown by the company, can help to negotiate a better deal.”
Teaming up with Walmart will help Flipkart fight Amazon.com Inc., which has committed to investing $5 billion in India. Alibaba-funded Paytm has also launched a recent offensive, setting the stage for a three-cornered contest in one of the world’s fastest growing online retail markets.
That’s why Walmart investment will be more strategic in nature, said Sunil Jain, founder of investment bank Sprout Capital Advisors. So, mutual fund valuations won’t have much bearing on the deal, he said. “It’s not going to change the equation a lot. Even a mark-down at this stage will not have an impact on the ongoing discussions.”
Morgan Stanley Institutional Fund
Morgan Stanley Institutional Fund valued Flipkart at $88.1 apiece as of Dec. 31, according to a March 9 filing with the U.S. Securities and Exchange Commission and reviewed by BloombergQuint. That compares with $70.1 apiece in March 2017. The fund, which holds 2,09,810 shares, has now pegged Flipkart’s valuation at $11.8 billion.
Vanguard Variable Insurance Funds
A mutual fund managed by U.S.-based investment firm Vanguard Group owns close to 45,164 Flipkart shares bought in two different tranches. It has valued them at $119.7 and $142.2 apiece, respectively, according to its March 1 filing with the SEC. That values Flipkart at $16.1 billion and $19.1 billion, respectively.
Valic Company – Mid Cap Strategic Growth Fund
Mutual fund investor Valic Co’s Mid Cap Strategic Growth Fund, which owns around 13,407 shares in Flipkart, has valued it at $88.11 apiece, as per its Feb. 7 filing to the SEC. That amounts to a valuation of $11.8 billion.
The U.S.-based Macquarie Group’s Optimum Fund owns around 14,498 shares in Flipkart through its investments across five rounds, as per February filings to the SEC. The fund values it shares at between $82.7-$133.5 apiece, pegging the company’s valuation in the range of $11.1 -17.9 billion.
The fund had slashed its per share valuation to $93.15 in December 2016 from its highest level of $135.12 in December 2015.
Flipkart has so far raised more than $6 billion since inception in 2007. The latest was a $2.5 billion investment by Masayoshi Son-run Softbank Vision Fund in August 2017. The online retailer was valued at about $12.5 billion last year, according to BloombergQuint’s calculations. That was much lower than the $15.2 billion in 2015, when it raised $700 million from Tiger Global and Steadview Capital, among others.
The last investment made SoftBank one of the largest shareholders, with a 20.7 percent stake, followed by Tiger Global at 20.6 percent and Naspers with 12.8 percent.
Flipkart's founders, Sachin Bansal and Binny Bansal, hold 5.5 percent and 5.2 percent, respectively, according to the latest filings with the Accounting and Corporate Regulatory Authority of Singapore.
Walmart, according to reports, is expected to purchase stake from existing shareholders like SoftBank and Tiger Global along with infusing capital.