Bengaluru: Mutual fund investor Valic Co. has trimmed the valuation of India’s most valuable start-up Flipkart, months after the e-commerce market leader raised nearly $3 billion from marquee investors led by Japan’s SoftBank, Tencent Holdings, eBay and Microsoft—an indication that some smaller investors in Flipkart are still divided over its valuation.

The timing of the latest valuation markdown comes as a surprise, given that Flipkart has largely consolidated its position as India’s top online retailer over the past 12 months and orchestrated a turnaround of its fortunes under chief executive officer Kalyan Krishnamurthy, after spending the better part of last year conceding market share to arch-rival Amazon India.

In its latest quarterly report, Valic marked down Flipkart’s valuation slightly to about $7.9 billion—which is way below the $11.6 billion valuation at which Flipkart raised funds earlier this year. In the previous quarter, Valic had valued Flipkart at roughly $8.5 billion. While technically Flipkart’s latest fundraising was a “down round" from its peak valuation of $15 billion, the fundraise was seen as a major victory for Flipkart, given its struggles in 2015 and the first half of 2016 when it made several strategic blunders and conceded significant market share to Amazon India.

For the three months ended 31 August, Valic valued each Flipkart share at $88.11, down from $94.27 in the previous quarter.

Mint had reported on 1 June that mutual fund investors such as Morgan Stanley, Fidelity Investments, Valic and Vanguard Group Inc.—which together hold a small stake in Flipkart—were still divided over its valuation.

Flipkart did not immediately respond to an email seeking comment, but in the past, the online retailer has brushed aside such markdowns. In past interviews, Flipkart founders Sachin and Binny Bansal (not related) have repeatedly dismissed these markdowns and termed them as “theoretical exercises."

“These are theoretical exercises. See, we are not a public company, so we don’t release our numbers publicly. Any investor who has an opinion on our valuation outside, including who are already invested in us, they are doing it (markdowns) based on some public information which is accessible to everybody... It’s a very uninformed opinion of somebody. So, I think it’s a theoretical exercise—as we’ve always said, valuation is what will happen when a real transaction takes place and not just on paper," said Sachin Bansal in a December 2016 interview with Mint.

Prior to the latest markdown from Valic, Flipkart had faced aggressive markdowns from some mutual fund investors such as Fidelity and Morgan Stanley, which slashed Flipkart’s valuation no fewer than five consecutive times. In the three months to December, Morgan Stanley had marked down the value of its holdings in Flipkart for the fifth consecutive quarter, while Fidelity had slashed Flipkart’s valuation by over a third during the three-month period ended in November.

To be sure, markdowns from mutual fund investors are not expected to impact Flipkart’s actual current valuation or damage its image as much as last year. Yet, their estimates will still have significance as one of the indicators of Flipkart’s current market-share battle against Amazon India and also as a barometer of the health of India’s online retail market, given that billions of dollars of investors’ wealth is at stake. It also suggests that some investors still feel that most of India’s large consumer internet start-ups are overvalued.

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