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Marked Down Again, Is Flipkart Losing Ground To Amazon? Essay

Morgan Stanley has marked down the value of its shares in ecommerce firm Flipkart by 15.5%, the second such cut in three months, according to The Economic Times website.

The current value of the ecommerce company is at $9.39 billion, down 38% from $15.2 billion, when it last raised funds in June 2015. Reacting on the mark down, Flipkart, in an email statement to Entrepreneur India said, "This is normal for any PE/VC or Mutual Funds to assess the FMV ( Fair Market Value ) of their portfolio companies once a Q. The FMV will vary between different PE/VC/MF and there will be never one view on what is the correct valuation.  Hence you cannot use this markdown to assess what is the “True Value” of Flipkart, it can  be more or even less."

Somewhat same sentiment is expressed by Investors who feel that nothing much has changed. Anil Joshi, Managing Partner, Unicorn India Ventures said, "Yes, the Flipkart has been devalued again and it is more to do with current market dynamics and investment scenario. This will certainly impact Flipkart on their next fund raise round and will also impact others in industry. While valuation has gone down but in my

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view nothing has changed operationally, except all Ecom companies working around new policy guidelines recently announced by Government. The new policy compliance is impacting industry, which will be a short term event as all companies will work around their strategy to comply with policy and maintain their share of business and grow. In fact most of the companies have started working on reducing their operational cost and increase their revenues. In my opinion Flipkart will overcome this temporary market sentiment issue by building stronger business case in time to come."

Beside Morgan Stanley, other major shareholders of Flipkart are – New York-based investment firm Tiger Global, South African media company Naspers, Singapore sovereign wealth GIC, Russian billionaire Yuri Milner's DST Global and early stage investment firm Accel.

Flipkart is competing with Amazon in India in a two-horse race. Both are battling markdowns and fund squeeze. With Amazon putting in at least 6700 crore since January 2016, Flipkart has been looking to raise a new round of funding. However, it is unable to convince investors to put in money at its asking price of USD 15bn valuation.

Flipkart not only is facing threat from Amazon, but will also see stiff competition once Chinese giant Alibaba launches in India.

(With inputs from Sneha Banerjee)

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