Flipkart: Can it Ride out the Fund Crunch?

In May 2016, the valuation of India’s largest e-commerce company, Flipkart, was marked down to $9.39 billion from $11 billion by Morgan Stanley Mutual Fund Trust ¬¬─ an investor in Flipkart. This was the second time the investor had marked down Flipkart’s value. The first markdown was done in February 2016, and it devalued Flipkart to $11 billion from the towering $15 billion claimed by the company. It was the $700 million funding round in July 2015 led by Tiger Global Partners (Refer to Exhibit I) that had taken the valuation to $15 billion.

Headquartered in Bengaluru in the southern state of Karnataka (India), Flipkart was started in 2007 and had grown from a single product e-commerce start-up selling books to a platform which sold pretty much everything (Refer to Exhibit II for Flipkart milestones). In 2016, though Flipkart was the largest e-commerce marketplace in India, its market share had dropped to 37% from 43% the previous year; its competitor Amazon, founded by Jeff Bezos, had a 24% share followed by Snapdeal, which had a market share of around 14%. US-based Amazon, the largest online retailer in the world, had started its Indian operations in 2012. It had taken Amazon only 3 years since its entry into India to swap positions with Snapdeal which had been Flipkart’s closest rival since the early days. Amazon had grown by 170% in FY16 in contrast with Flipkart’s 5% growth. .