Flipkart, a prominent player in the e-commerce sector, has witnessed a significant downturn in its valuation over the span of two years. According to recent reports, the company’s valuation has plummeted by a staggering $5 billion from January 2022 to January 2024. This revelation comes to light through equity transactions orchestrated by Flipkart’s parent company, Walmart, headquartered in the United States.
The decline in Flipkart’s valuation is particularly notable, with its worth dwindling from $40 billion in January 2022 to $35 billion by January 2024. This substantial decrease is attributed to Walmart’s strategic restructuring of Flipkart’s equity framework, reflecting a shifting landscape within the company’s financial dynamics.
Walmart’s proactive measures in restructuring Flipkart’s equity have been instrumental in revealing this significant decline in valuation. By diluting 8% equity in Flipkart for $3.2 billion during the fiscal year 2022 and subsequently increasing its shareholding by 10% to approximately 85% in FY2024 for $3.5 billion, Walmart has played a pivotal role in reshaping Flipkart’s ownership structure.
Furthermore, Flipkart itself has acknowledged that the decline in valuation is largely attributable to the demerger of its fintech arm, PhonePe, into a separate entity. Despite Flipkart’s efforts to mitigate the impact of this demerger, sources suggest that the current valuation of the company lies within the range of $38-40 billion, signaling a potential discrepancy between internal and external assessments of its worth.
In fiscal year 2024, Walmart’s active participation in the equity market saw the acquisition of shares from certain Flipkart noncontrolling interest holders, along with settling liabilities to former noncontrolling interest holders of PhonePe. As a result, Walmart’s ownership of Flipkart surged from approximately 75% in January 2023 to approximately 85% by January 2024, underscoring the retail giant’s commitment to strengthening its foothold in the Indian e-commerce landscape.
Overall, the fluctuations in Flipkart’s valuation and the strategic maneuvers undertaken by Walmart underscore the dynamic nature of the e-commerce industry and the competitive forces at play in the global market.
Flipkart has responded to the reported decrease in valuation, dismissing it as an “appropriate adjustment” as per the company’s internal assessments.
A spokesperson from Flipkart clarified, stating, “This interpretation is incorrect. The PhonePe separation was completed in 2023, which saw an appropriate adjustment in Flipkart’s valuation.” They further emphasized that the last enterprise valuation exercise was conducted in 2021, where the valuation of Flipkart included PhonePe’s valuation as well.
According to Flipkart sources, there has been no change in the organic valuation of the company since 2021. The separation of PhonePe was accounted for based on its valuation at that time, and PhonePe’s subsequent increase in valuation post-fundraising activities is independent of Flipkart’s core valuation.
PhonePe, post its recent $850 million fund raise from investors such as General Atlantic, Tiger Global, Ribbit Capital, and TVS Capital Funds, is now valued at over $12 billion.
Furthermore, Flipkart sources highlighted the significant growth in Gross Merchandise Value (GMV), ranging between 25-28% year-over-year, reaching $29-30 billion in 2023. This growth in GMV is anticipated to positively impact Flipkart’s valuation, given its trajectory towards profitability.
“In reality, if the valuation was to be done now for Flipkart, it would have gone by to the vicinity of $38-40 billion considering the growth in GMV and near profitability. But no such valuation exercise has happened for Flipkart since 2021,” stated the source.
In terms of financial performance, Flipkart reported a net loss of Rs 4,846 crore and a consolidated net total income of Rs 56,012.8 crore in FY23. Total expenses for the company amounted to Rs 60,858 crore during the reported fiscal year.
Sources: moneycontrol.com