Swedish investment firm Kinnevik has marked down the valuation of Quikr by 45% to about $570 million from more than $1 billion as of September 2019, the firm said in its annual earnings statement earlier this month.
The fall in valuation comes as the Bengaluru-based online classifieds and transactions marketplace discovered fraud in its co-living and auto segment, where employees along with vendors faked transactions. This led to the company laying off 1,000 from its 3,000-odd workforce, besides shutting down divisions where there was fraud, as had reported in December.
Kinnevik notes that the reduction in Quikr’s worth is due to the company “reducing its footprint”. Additionally, it changed methodology of valuation from discounted cash flows to net revenue multiples “linked to the trading of its publicly listed peers”, besides the fraud, Kinnevik executives said in an analyst call.
The development is significant as Quikr will be one of the first unicorns to see a valuation cut by its own financial investor in recent years. While Flipkart suffered a series of markdowns in 2016, only to bounce back later, other online marketplaces like Snapdeal and ShopClues have also seen a fall in their net worth from 2016 peaks.
Kinnevik owns 17% in Quikr and is one of its largest shareholders along with Tiger Global Management, Warburg Pincus and Matrix Partners India, among others.
Kinnevik has invested a total of about $106 million in Quikr, including $15 million last year in what seems to be an internal round of funding for the company.
The Swedish firm is also hoping for a recovery. “The whole purpose of downsizing the company…to get in a situation we’re not dependent on external capital…with that situation, Quikr can buy some time now to improve the healthy part of the business, and from this point in time, increase the valuation rather than the other way around,” said Kinnevik CEO Georgi Ganev in the analyst call.
A Quikr spokesperson did not comment on the valuation markdown and directed TOI to a blog from January 30 about its restructuring and fraud. “We’ve undertaken third-party audits, identified and culled out such players from our marketplace, exited such employees from our company and initiated necessary action against all the parties involved,” said the post. It added that the fraud has not impacted categories like jobs, goods and services that drive a majority of its revenues.
For the year ending March 2020, Quikr generated just under $65 million in annualised cash revenue at a yearly growth rate of a little less than 60%, according to Kinnevik’s report for six months ending September.
Quikr had announced its last round of funding nearly five years ago in April 2015, when it had mopped up about $150 million and became a unicorn. Since then, the company has done a series of primarily stock acquisitions, including mortgage lender HDFC’s realty brokerage business in 2017 and more recently Zefo, a pre-owned goods seller backed by Sequoia. These deals have valued Quikr at $1.5-1.6 billion. But Kinnevik had kept the valuation pegged to the last major investment round.
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