INDIAN tech startups are starting to show wear and tear as foreign competitors begin to close in on their home market.
This week, we reported that Ola’s valuation took a hit as it heads for a potential down-round. Existing and potential investors in the transport-hailing app have been concerned about Uber’s growing dominance in the Indian market, which has forced Ola to cut its valuation by 40 percent.
Ola isn’t the only Indian unicorn that’s struggling to maintain its value from over-inflated past rounds. According to a mutual fund managed by Morgan Stanley, e-commerce giant Flipkart recently had its shares slashed 38.2 percent, which brings its value from a previously lofty US$15 billion down to US$6 billion.
Tech in Asia reports that this isn’t the first time that Flipkart has experienced a valuation markdown. In fact, the latest is actually the ninth time in Flipkart’s operating history that it’s investors have chopped its valuation.
The share cuts are coming at a bad time, as Flipkart is reportedly in advanced talks with global retail giant Wal-Mart to raise US$1 billion. While the terms of the deal are still private, it’s likely that Flipkart badly needs the fresh funds to fight back as Amazon’s Bezos said back in June that he has plans to drop another US$3 billion on winning the India market.
Despite the massive markdown, Flipkart emphasized its traction and shrugged off the negative press. “We are seeing strong traction in our business momentum and operating performance. We continue to be focused on innovating for the customer, growing the market and executing on our long-term growth agenda,” said a company spokesperson.
Beneath the brave front, Flipkart has been showing signs of struggle over the past few months as the startup reported a recent exodus of important executives – including VP and private label head Mausam Bhatt and SVP of engineering Peeyush Ranjan.
While some say that a down-round can be deadly, WIRED predicts that that these are a signs that the tech sector is “undergoing a correction” due to overblown valuations of the past. “On average, private tech companies are 30-50 percent less valuable than they were last year at this time,” it reported and notes that many important companies will also be heading down the same path in the future.