With Li & Fung investment, ShopX valuation reached $100 Mn

The $35 million fund receiving announce that ShopX had made in August 2018, its final tranche has been received about a week ago.

The entire $35 million (Rs 241.77 crore) was poured in by Fung Group's investment arm, FSX Pte. Ltd - Li & Fung. The Group purchased 1,02,046 CCPS 2018-19 Series from ShopX for the same.

This was however done in three tranches where the share prices for each tranche was different. The first Rs 102.88 crore worth cheque was received in August last year where 46,496 shares were issued at a price of Rs 22,127.7 each. The next ticket of Rs 104.21 crore that was received in May this year, saw the share prices improve to Rs 24,934.79. The final Rs 34.68 crore tranche saw the share price increase to a final Rs 25,176.

This is important because the share price, that indirectly reflects on the valuation of the company, was higher than the current round even in 2016. From May 2016 to October 2017, the share prices were stable at Rs 29,165.15. After that, till the Fung Group investment, the share prices had capped at Rs 34,661.

From Rs 34,661 to Rs 22,127.7, the dip in share valuation, and hence the company’s valuation, is significant. Significant enough, that even with an increase in prices during the round, the maximum price stayed below 2016 figures.

The reason behind the same is that until May 2018, Nandan Nilekani had been the only investor in the firm. From the beginning of ShopX journey, apart from the co-founders Amit Sharma and Apoorva Jois’s initial investment worth Rs 22 lakhs each, and the mentors - Jagdish Kini and Pramod Verma’s minimum capital infusion of Rs 70,000 each, the entire capital poured in before Fung was by Nilekani. This figure stands at Rs 125 crores and 13 lakhs.

So, when 2016 beginning to May 2018, Nilekani was the only investor throughout, the valuation grew steadily. But when a new investor came in, and estimated valuation of the firm in their own way, the figure came down significantly, and hence the drop in share prices.

When Entrackr sent queries to ShopX regarding the same, Mahendra Chordia, CFO of the company responded saying, “The valuation of the company did not go down, only the number of shares increased and hence the downfall in prices.”

When asked about the current valuation of the company, he said the company has a policy to not reveal those figures.

Instead, he said, “The company has an exit GTV of $600 million in the last fiscal, and on the basis of that you can see the valuation must only be going up.”

When Entrackr tried to figure out the company’s valuation via the number of outstanding shares and value of the shares in the current round, the estimate came to be around Rs 613.15 crore, that is $87.59 million. To put things in perspective, if the valuation hadn't gone down, ShopX would have been worth Rs 844.15 crore post money, that is $120.59 million.

This signifies a 27.37% haircut in valuation, when we assume the valuation as Nilekani's last round in May 2018.

Denying the figure, Chordia said that the valuation of the company isn’t this low. The company has grown multifold since then to achieve the aforementioned exit GTV run rate of $600 million, and hence the valuation is also much higher than the estimate.

On the other hand, the reason that the company broke the streak of sticking to Nilekani for investment when they found another investment whose interest aligned with ShopX.

“Nilekani will still be investing in the firm, as his interests have aligned with the firm for the longest time. He is not taking an exit, however, he may make way for new investors in the future,” explained Chordia about the future of Nilekani in the firm.

Update: While the valuation estimated by Entrackr was based on assumption that the company followed DCF method, Amit Sharma, the CEO of the company has clarified that their methods were different (GTV multiples) and hence the reported dip is incoherence with reality. 

He claims that post money valuation in Li & Fung round was $100 Mn, which was 9 months ago, and the firm has seen 13X growth since then.