All is not well with Zomato and Flipkart with slash in valuations by HSBC

If reports are to be believed, all is not going well with India-based Flipkart and Zomato over the last few weeks. This is because the valuation of Zomato, a retail restaurant discovery platform has been slashed by HSBC’s brokerage arm.

Currently valued at $500 million by HSBC, the largest shareholder of Zomato, InfoEdge has completely disagreed with HSBCs contention and the subsequent reasons.

Commenting on the latest developments, Sanjeev Bikhchandani, founder of InfoEdge revealed that Zomato’s listing will attain profitability by Q3 2016. However, the currently valued figure accounts half of the company’s total funding which they raised in September.

HSBC has lowered the valuation of Zomato after careful study and they had cited valid reasons such as advertisement oriented business approach, huge growth in competitors including the losses in the international business operations.

With InfoEdge holding 50 percent stake in Zomato, HSBC stated in its report that except, all other business properties funded by InfoEdge doesn’t look attractive.

Responding to media queries, HSBC analyst Rajiv Sharma said that they do have a discounted cash flow and value the business at around 50 percent lower than the actual valuation amount.

Interestingly, Morgan Stanley also slashed the valuation of the Bengaluru-based e-commerce giant, Flipkart to $103.97 per share, which is 27 percent lower than the previous fundraising amount. The valuation of Flipkart has decreased to $9.5 billion from $15.2 billion in the last few months, thus bringing it back to the 2014 status.

In a major setback to the India’s homegrown ecommerce company, the mutual fund investors Fidelity Rutland Square Trust II and VALIC Co recently reduced the value of their stake in Flipkart by 20 percent.

In addition to Zomato, HSBC also lowered the valuation of PolicyBazaar, by 10 percent from the existing $200 million.

It is clearly evident from the recent reduction in valuations that companies are struggling to retain customers and gain profits despite pumping huge funds from various stakeholders.