Flipkart's valuation down to $5.57 bn after Morgan Stanley slashes value of its holding

A mutual fund managed by Morgan Stanley has marked down the value of its shares in Flipkart by 38.2% leaving India's largest e-commerce marketplace's valuation at $5.57 billion, nearly a third of its peak valuation of $15.2 billion last year.

The fund has slashed the value of its Flipkart shares to $52.13 per share as of September 2016 from $84.29 per share in March 2016 and peak share price of $142.24 as of June-end 2015, according to filings with the US Securities and Exchange Commission (SEC).

While the filing was done on 28 November and signed 17 November, the reporting period is 30 September. It's likely that the investment company may have taken into account a number of external developments including the ever-increasing competition from US-based rival Amazon, the serious slump in sales following the announcement on demonetisation and the resultant losses it suffered over undelivered COD orders.

An email sent to Flipkart did not elicit any response at the time of filing this report.

Flipkart's increasing net losses in FY 2015-16 could also have contributed to the sharp fall in valuation. The net loss of Flipkart Internet Pvt. Ltd, which operates Flipkart, doubled to Rs 2,306 crore in the financial year ended 31 March 2016, compared with Rs 1,096 crore in the year-ago period, according to filings with the Registrar of Companies.

The development was first reported by The Economic Times.

The e-commerce major has been battling eroding valuation as several American mutual funds have marked down the value of their investments in the firm over the course of what looked like a dreadful year for the company.

Recently, two American mutual funds, Fidelity Rutland Square Trust II and Valic Co., have marked down the value of their investment in the company for the second time this year.

The mutual fund managed by Fidelity Investments lowered the value of Flipkart shares it owns by 3.2% and Valic marked down the value of its investment in the company by 11.3%.

The latest markdown by Fidelity leaves Flipkart's valuation at $8.71 billion, but Valic's valuation positions the Indian e-commerce giant at $10.24 billion.

Morgan Stanley's last markdown, the third one, happened in June when it reduced the value of its shares on Flipkart by 4.1%, pegging its valuation at $9 billion. In its second valuation markdown, the company had slashed the value of its stake by 15.5% to $87.86 at the end of March 2016 valuing Flipkart at $9.4 billion compared with $103.97 three months earlier when it reduced the valuation by over 27% in February to value Flipkart at $11.1 billion.

Morgan Stanley first acquired Flipkart shares in 2013 during the company's Series D round. It invested again in 2014. To be sure, the value of their investments has risen since they bought shares of Flipkart.

The latest markdowns come at a time when Flipkart is reportedly trying to raise more funds from Wal-Mart Stores Inc., the world's largest retailer and Canadian fund CPPIB amid an intense battle with the Indian arm of US-based Amazon.com Inc. to maintain its leadership in the Indian e-commerce market.

It's also reported that the company is in talks with several investment banks, including the US-based Goldman Sachs Group Inc. to attract investors for a new round of funding.

The firm last raised funds in 2015 from existing investors led by Tiger Global.

Flipkart's other investors include Tiger Global Management, Naspers, Accel Partners, Iconiq Capital, GIC, DST Global and Sofina Societe.