IDG looking to exit Flipkart?

Priyanka Pani Mumbai | Updated on January 20, 2018


Venture Capital firm may be considering secondary sale of 0.9% stake in e-tailer

Venture capital firm IDG Ventures may sell its remaining stake in Flipkart. It owns about 0.9 per cent stake in the e-commerce firm, and is likely to initiate discussions with other investors for a stake sale.

At least two investors confirmed to BusinessLine that they have received feelers from IDG to initiate talks. IDG did not respond to queries from BusinessLine.

Last year, the VC firm had sold a 1 per cent stake in Flipkart for around ₹900 crore at a valuation of $12.5 billion. IDG originally was an investor in Myntra, which got merged with Flipkart.

At present, Flipkart’s large investors include Tiger Global (which is also a major shareholder in its rival Amazon), Accel Partners, DST Global, South Africa’s Naspers, Singapore’s GIC and the Qatar Investment Authority.

Industry experts feel that lately there have been concerns over the escalated valuations of Indian e-commerce giants, and that corrections have begun. Many investors have started their due diligence and are planning for a secondary sale — even if it is at a lower valuation — fearing that there will be further correction in the market.

Last month, US-based hedge fund Morgan Stanley, a key investor in Flipkart, had marked down its valuation from $15 billion to $11 billion.

Trend drivers

Experts feel that factors driving this trend are fear of consolidation which may reduce the overall valuation of standalone companies; fear of global slowdown which is affecting valuations ; large hedge funds tightening their pockets; and, fear that large global e-commerce giants may consider setting up shop in India rather than buying existing companies. Besides, Flipkart is not planning a public listing soon, which also triggers secondary sale exits.

“It is quite unsure when the next upward cycle will come in the market. So if an early stage VC gets a good return — instead of having to wait — they will sell. On the other hand, it’s a good time for them to increase their shareholdings in good assets as prices are on correction curve. In the coming months we expect more exits,” said Tej Kapoor, Country Head of UK-based investment firm Daily Mail and General Trust.

Recently, venture fund Saama Capital India Advisors sold its entire stake in another major online market place, Snapdeal, which is backed by SoftBank and Alibaba.

Saama sold its stake to Canada’s Ontario Teachers’ Pension Plan in a secondary sale .

Sequoia also sold its stake in Snapdeal early this year.

Apoorv Ranjan Sharma, founder of early stage fund Venture Catalyst, said: “Investors are sensing a further correction in the e-commerce market and are also sceptical about the profitability of these companies and hence are going for secondary sales.

“The new investors will get to buy at lower valuation and can make money when these companies go for an IPO. They will have to get listed in a year or two.”

Published on March 29, 2016

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