Flipkart sticks to ‘strong traction’ line after massive devaluation

Binny Bansal (left) and Sachin Bansal are the two co-founders of India’s top homegrown ecommerce startup. Photo credit: Flipkart.

Flipkart is going with its message of strong business momentum and “innovating for the customer” in the face of a massive markdown by Morgan Stanley.

The ecommerce company, once thought to be worth US$15 billion, is now only worth US$6 billion, according to a Morgan Stanley fund. The company, however, is putting up a brave front, saying market valuations aren’t all that important.

“Mutual fund mark-to-market is a purely theoretical exercise and and is not based on any real transactions. We are seeing a 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,” a spokesperson said.

Earlier this year, Flipkart CEO Binny Bansal started talking about customer-centricity. In May, he followed Amazon and Snapdeal in cheering for customer service over GMVs – a metric that was considered the holy grail of all ecommerce growth till then.

See: Amazon vs Flipkart: who won India’s biggest shopping season?

The jury, however, is out on whether Flipkart is still king. Over the past few months, the company has seen a slate of top-level executives, including finance chief officer Sanjay Baweja, quit. It’s also been involved in awkward situations regarding hiring, and fund-raising.

In a fiercely contested market, the company has been trying to defend its turf against Amazon India. During the first few days of India’s biggest shopping season, Flipkart beat Amazon in number of units sold.

Also, Alibaba is hovering over both of them.

Under these circumstances, a markdown is not necessarily always a bad thing for startups that have been commanding extremely steep numbers. The Indian startup ecosystem has been buzzing with whispers of how Flipkart, Ola, and some others are finding it hard to get investors to give them money at current valuations.

See: Snapdeal, Flipkart learn from Amazon as ecommerce focus shifts in India

In the case of publicly traded companies, it is not uncommon to see long-term investors buying stocks on apparent bad news. Because startups don’t have these external checks and balances, the market takes cues from current investors.

Flipkart did not respond to an email asking if this markdown will make it easier for founders Sachin and Binny Bansal (they’re not related) to raise money. But it’s easy to see how the markdown can in fact help, once the initial shock settles.