Fidelity Investments has slashed the fair value of SoftBank-backed social e-commerce by 10%, becoming the latest investor to slash the value of an Indian startup.
Through multiple funds such as Variable Insurance Products Fund III and IV, and Fidelity Central Investments Portfolio LLC, Fidelity Investments has slashed the fair value of Meesho by 9.7%. This effectively pegs the valuation of the company at $4.4 billion, moneycontrol.com reported on Tuesday.
Many investors are carefully reassessing the value of their investments amid looming recession fears and a challenging fundraising environment.
Some of the Indian startups that have recently seen a valuation downgrade include edtech giant BYJU’s, health tech firm PharmEasy, ride-hailing startup Ola and fintech firm Pine Labs.
These companies are backed by prominent investors such as Softbank, Tiger Global and Sequoia. While SoftBank has invested in Ola, Swiggy, and BYJU’s, Sequoia Capital is on the cap table of Ola, Swiggy, BYJU’s, and Pine Labs. Tiger Global Management has backed Ola, Swiggy, and BYJU’s.
Factors such as financial performance, growth potential, market position, and profit generation capabilities impact a company’s valuation, said Gaurav Singhvi, co-founder of We Founder Circle. Failure to meet growth targets, operational challenges, or difficulties in adapting to market changes can lead to investors reassessing and lowering valuations, he added.
Earlier this month, Meesho laid off 15% of its workforce, amid increasing pressure for the company to tighten costs and sharpen focus on profitability.
Last year, Meesho said it was working on becoming EBITDA-positive by mid-2023 before going public. In FY 2022, its losses widened 7.5 fold to Rs 3,247 crore despite a 4.5 times surge in revenue to Rs 3,232 crore during the same period, according to Entrackr.
The valuation downgrades come against the backdrop of the ongoing funding winter, driven by multiple factors such as the rate hikes in developed markets, the geopolitical situation in Eastern Europe, and COVID-related supply chain shocks.
Indian startups raised $3.36-billion funding in the first quarter of 2023, down 72% from the last year, according to data from DealStreetAsia DATA VANTAGE’s latest report India Deal Review: Q1 2023.
At this run rate, Indian startups will raise just over $13 billion in 2023.