Bengaluru: A mutual fund investor in Flipkart Ltd, India’s largest e-commerce firm, has slashed the value of its holdings by as much as 27%, the latest indication that the investor rush of the past two years into Indian startups has led to unsustainable valuations.

Morgan Stanley Institutional Fund Trust valued its stake in Flipkart at $58.9 million as of 31 December, down from $80.6 million in June 2015. The company reported the number late Friday in a filing with the Securities and Exchange Commission, the US stock markets regulator.

Morgan Stanley Institutional Fund Trust also cut the value of its stake in other high flying startups including file storage company Dropbox Inc. and data analytics company Palantir Technologies Inc.

The news was first reported by the Information, a tech news website.

Flipkart didn’t immediately respond to an email seeking comment.

Flipkart was valued at $15 billion when it received $700 million from Tiger Global Management, Qatar Investment Authority and other investors in June. That was its fourth round of fund raising in a year. Its valuation shot up roughly 5 times from $2.5-3 billion in May 2014.

Morgan Stanley’s latest estimate implies that the mutual fund currently values Flipkart at $11 billion.

The mutual fund’s markdown confirms Mint reports of a correction in valuations of India’s e-commerce companies including Flipkart.

China’s Alibaba Group, which has backed Paytm and Snapdeal, is looking to increase its footprint in India and is exploring the acquisition of a stake in India’s largest Internet firm Flipkart Ltd, according to three people familiar with the matter.

The talks are at a very initial stage and the likelihood of a deal is a function of Flipkart’s willingness to offer a discount on its current valuation of $15 billion, the three added, asking that they not be named.

Mint reported on 4 February that China’s Alibaba Group is in early talks to buy a stake in Flipkart and increase its holding in Flipkart rival, Snapdeal. The talks are at a very initial stage and the likelihood of a deal is a function of Flipkart’s willingness to offer a discount on its current valuation of $15 billion, Mint had reported then.

There are not too many takers for India’s top e-commerce firms at their current valuations, prompting both Flipkart and Snapdeal (run by Jasper Infotech Pvt. Ltd) to approach Alibaba Group for cash.

Alibaba is in talks to $4 billion in loans from at least eight banks, partly to fund acquisitions, the Wall Street Journal reported on Friday.

Morgan Stanley’s filing comes nearly two months after Flipkart appointed co-founder Binny Bansal as its new chief executive officer, replacing Sachin Bansal, who became executive chairman. Analysts said Flipkart made the change to increase its focus on keeping arch-rival Amazon India at bay.

Over the course of 2015, Amazon gained market share in India at the expense of both Flipkart and Snapdeal, according to publicly available data and several company executives.

It’s clear Amazon’s rapid expansion in India, fuelled by an unprecedented spending spree on advertising, discounts and logistics and its technology expertise, is affecting Flipkart and Snapdeal.

Early last year, Flipkart set a target of generating annualized gross merchandise value (GMV) of $8 billion by December. However, the company’s current average monthly annualized GMV is roughly $5 billion, Mint reported on 17 February.

This number, which includes sales at Flipkart’s unit Myntra, indicates Flipkart missed its internal sales target. GMV refers to the value of goods sold on the site, not actual revenue, and excludes discounts.

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