The saga of markups and markdowns continue for ecommerce biggie Flipkart. Two investors have altered the valuation of the marketplace recently. Mutual fund investor Fidelity has increased valuation by 3% to $84.29 per share whereas investment firm T Rowe Price has decreased it by 20% to $96.29 per share.
The result? As per Fidelity, Flipkart’s value stands at $9 billion and T Rowe values it at $10.3 billion. The good news for the online marketplace is after a series of devaluations by Morgan Stanley, Valic Co 1, Fidelity, T Rowe Price and Vanguard Group, this is its first markup this year.
It won’t be wrong to assume that Jabong acquisition can be the main trigger behind this valuation change. It was quite expected that the ecommerce industry’s view about Flipkart would change post acquisition.
The jury is divided in half – positive and pessimistic. Some believe that Flipkart has reached an indomitable position with nearly 70% of online fashion industry in their control. The other half thinks that it can be the etailer’s one of the biggest mistakes.
Sanjeev Krishan, Private Equity Leader at PwC India explained,
“Valuations are a very subjective matter and currently we are going through an extremely volatile times. Because of it, investors and companies are reacting to the situation in different ways.”
‘Reacting to the situation in different ways’ can very well be the Flipkart-Myntra-Jabong deal.
The allure of cash is the reason why Jabong’s parent company Global Fashion Group (GFG) leaned towards Myntra.
“It reflects our preference to receive cash proceeds that can be reinvested in other GFG businesses,” elucidated Lorenzo Grabau, CEO of investment firm Kinnevik AB that is largest GFG stakeholder.
In a hurry to find a suitable local buyer for Jabong, Grabau started exploring other leads when Snapdeal started to raise questions and restructure the proposed deal. And he found the right buyer in Flipkart.
“Within that context, the GFG board concluded Jabong’s position as India’s leading fashion ecommerce destination would be best served through a business combination with a local player. Having reviewed multiple options over several months, the board has resolved to sell Jabong to Flipkart Group,” shared Grabau.
While GFG seems quite pleased with the $70 million, we are yet to find out that from the two – Flipkart and Snapdeal, who is the biggest winner and loser. Sellers, what do you think? Please leave your comments.
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