US funds mark down Paytm & Ola valuation as Covid hits business

BENGALURU: 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.

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.