Mutual fund T. Rowe Price has cut the value of its holding in Flipkart, India’s most valued Internet firm, by 15 per cent — the second fund to resort to such a move after Morgan Stanley.
The development comes at a time when Indian start-ups are finding it difficult to raise funds as lack of profits raise concerns over valuations.
T. Rowe cut the value of its Flipkart holding to $120.69 per share, according to its filings made for March quarter, as compared to the value of $142.26 assigned to them at the end of December 2015.
The fund earlier cut the value of global Internet giants like ride hailing start-up Uber Technologies and AirBnB by six per cent each and also Dropbox by 16 per cent, as per its disclosures for the March quarter. The T. Rowe mark-down would reduce the valuation of home grown e-commerce giant Flipkart to $13 billion from the $15.2 billion it was valued during its last round of fund-raising in July 2015.
The mark-down by T. Rowe Price is not as sharp as Morgan Stanley’s, which cut the value of its holdings by 27 per cent to $103.97 a share from $142.24 a share, which brought down the valuation of Flipkart to $11 billion.
T. Rowe Price had first invested in the Bengaluru-based firm in December 2014, when the company raised $700 million, which also saw participation from sovereign wealth fund Qatar Investment Authority and Hong Kong-based hedge fund Steadview Capital.
Flipkart's other shareholders are New York-based investment firm Tiger Global Management, South African media giant Naspers, Singapore sovereign wealth GIC, Russian billionaire Yuri Milner's DST Global and early stage investment firm Accel.
The markdown also comes at a time when Indian government has tightened its rules on ecommerce firms. The most important rules are that online marketplaces cannot influence product prices and no group company or seller on a marketplace can contribute more than 25 per cent of the sales generated.
A spokesperson from T. Rowe Price had recently told The Hindu that the fund is seeing a ‘bifurcation in the funding environment’ with those delivering on their business promises being able to maintain valuations. Others, who do not, are seeing valuations fall and may find it challenging to raise further capital, while declining to comment on specific holdings.
