More reports on: Mutual funds, Morgan Stanley

Morgan Stanley marks down its Flipkart holding by 38%

30 November 2016

A mutual fund managed by Morgan Stanley has sharply cut the value of its shares in India's largest e-retailer Flipkart for the fourth time over a period of a year, valuing the company at $5.5 billion.

This is by far the most sizeable correction for Flipkart, which last raised a financing round in July 2015 when its paper valuation stood at $15.2 billion. The macro environment has since turned sour globally around technology startups, and mutual funds, which had fuelled valuations have gone sour on private investments.

According to regulatory filings, Morgan Stanley, which holds around 1.5 per cent stake through its various entities in Flipkart, reduced the value of its holding by 38 per cent, pegging the company's shares at $52.13 apiece as of September.

Morgan Stanley Mutual Fund Trust currently holds 1,969 shares in Flipkart Online Services. It first invested in Flipkart in 2013, and its shares are collectively valued at $102,644. This entity had valued Flipkart shares at $87.9 apiece as of March 2016, which was pared down to $84.29 by June 2016. In December last year, Flipkart's shares were priced at $103.97 each by this particular mutual fund.

A Flipkart spokesperson said in an emailed response to The Times of India that a mutual fund mark-to-market is a purely theoretical exercise and is not based on any real transactions. "We are seeing strong traction in our business momentum and ope rating performance. We continue to be focused on innovating for the customer, growing the market and executing on our long-term growth agenda," the statement said.

Other mutual fund investors, too, have been correcting Flipkart's valuation this year with the likes of Valic, Fidelity and T Rowe Price readjusting the value of their shares in the company every few months.

This latest markdown comes at a time when the online retailer is fighting a fierce battle with the Jeff Bezos-led Amazon, which is ploughing billions of dollars into the local market to topple its home grown rival.

A series of markdowns through this year has affected the company's fundraising plans at its current valuation. Talks with strategic players like Walmart and Alibaba haven't yet yielded in an investment deal and these markdowns may impact deal-making going forward.

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