US Funds Lower Valuation Of Indian Unicorns Paytm, Ola due To Covid: Report

 

US-based mutual funds T Rowe Price and Vanguard have marked down the valuation of two of India’s most valued internet companies — mobile payments major Paytm and ride-hailing platform Ola, respectively, as the pandemic disrupted business in the first half of the year. The markdowns come from mutual funds holding about 1% stake in both the companies.
T Rowe Price, which invested at least $150 million in Paytm in December 2019, has cut the value of its shares in the company by 26% as of June 2020. The shares — which were acquired for $254 apiece — have now been valued at $188 by multiple funds managed by T Rowe Price, according to filings. Paytm was valued at close to $16 billion, when it last raised funding in December. A source briefed on the matter said Paytm’s shares have been marked up close to their original price during the September quarter, though an exact figure could not be determined.

Ola, whose business has taken a bigger hit due to the pandemic, has seen the valuation of its shares fall by nearly 50% by Vanguard as of August 31. Ola’s shares were being valued at $162.5 apiece as against $311 in February, according to filings seen by TOI. Ola was valued at about $6.5 billion, when it raised capital from carmaker Hyundai in the first half of 2019.

This is not the first time India’s most valued startups have faced a markdown from mutual funds, and the numbers could swing back. In 2016, e-tailer Flipkart’s valuation was marked down to $5.6 billion by Morgan Stanley and Fidelity but it went on to be acquired by American retail giant Walmart for $22 billion. Earlier, Ola had faced a 40% markdown from Vanguard in 2017 before recovering its valuation in 2018. Both Flipkart and Ola also had to raise capital at lower valuation before recovering.

Ola, Vanguard and T Rowe Price spokespersons declined to comment on queries from TOI. A Paytm spokesperson said that June valuation for the company is dated as the markets then were “extremely volatile” and some of its new businesses like payment gateway, UPI money transfer, equity trading, lending, PoS devices and advertising are performing better than expectations.

“While we cannot comment on the internal valuation exercise of our shareholders, we understand that such exercises reflect overall uncertainty caused by the pandemic and investor-specific methodologies on valuation. While our last round of funding was about a year ago, we are seeing strong momentum in our business wherein GMV has gone up by nearly 100% in the last 18 months. At the same time, many of our new businesses, particularly payment gateway, UPI money transfer, equity trading, lending, POS devices and advertising are performing far ahead of our internal expectations. Our FY20 revenue has increased to Rs 3,629 crore, even as our burn has reduced by over 60% in the last 18 months. We believe that the document that you are referring to is from June quarter (dated) and from a time when the markets globally were extremely volatile,” said the spokesperson.

Investors tracking the startup ecosystem said while digital payments have seen increasing traction due to the pandemic, which should help Paytm, it is the increasing competition that the Noida-based company faces is a challenge. “Two years ago, Paytm was a monopoly in mobile payments but now there is PhonePe, Google Pay, Amazon Pay and also the recent tie-up between Reliance and WhatsApp,” said a venture capital investor, who requested not to be named. The development also comes as the government has imposed restrictions on investments from China amid the border conflict. Paytm counts China’s e-commerce giant Alibaba Group and its fintech affiliate Ant Financial as its largest shareholder, together holding close to 40% stake in the company.

For Ola, the markdown comes as there has been a global slowdown in mobility business as the biggest companies in the world have allowed employees to work from home for most of 2020. Even in the US, its rival Uber had said in August that business is down 50-85% in various cities. Sources close to Ola said that business in some cities has started inching back to pre-Covid levels, even as the SoftBank-backed company is increasing its focus on electric vehicles.

Sandip Ginodia , CEO

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