Quikr loses unicorn status as Swedish investor Kinnevik pares valuation

Bengaluru-based online classifieds firm Quikr may have lost its unicorn status (with a valuation upwards of $1 billion) after Swedish investment firm Kinnevik, a major investor in the company has pared the valuation of the firm by about 45% to about $570 million in its year-end report and its earnings statements.

Kinnevik blamed the drop in valuation on Quikr discovering frauds where certain dealers and vendors within the managed rentals and car segments have placed fictitious or misrepresented transactions on its platform. This, Kinnevik said would result in the value of revenue generated in these categories by Quikr to be overstated.

"There is a risk that some receivables may not be entirely recoverable. As a response, the company has reduced its footprint in the concerned segments as managing its overall cost base. Quikr has also strengthened its internal operational controls and is pursuing legal actions against those responsible," said Samuel Sjöström, Head of Strategy at Kinnevik in an earnings call.

He added, "This is a reflection of not only the effect of the uncovered fraud but also the company reducing its footprint within these particular segments as well as a number of amendments to the company's revenue recognition principles to strengthen the integrity of its reported financials going forward."

Change in methodology

The investment firm also stated that in valuing the Quikr investment, "We have moved away from a discounted cash flow analysis and base our valuation on forward-looking net revenue multiples. More specifically, we are focusing on Quikr's upcoming fiscal year, ending in March 2021. By doing this, we base our valuation on a near-term budget instead of longer-term projections and also make our valuation of Quikr increasingly linked to the trading of its publicly listed peers."

However, Kinnevik maintained that Quikr's other business segments, such as blue-collar jobs, used goods, classifieds and real-estate sales have historically accounted for a majority of revenue and will continue to see growth and occupy strong positions in the respective markets.

“While we are very disappointed with what has been uncovered and its effect on the value of our investment, we believe that the measures that have been taken and are being taken are both forceful and proportionate, and their clear intention is to leave us with a healthier but somewhat smaller company,” said Sjöström.

Kinnevik CEO Georgi Ganev said that the Quikr has laid off a lot of their workforce to become profitable faster. “We sit now with a smaller company, but we also think it's much healthier. And we will, of course, focus on those remaining verticals and to continue to grow them going forward,” said Ganev.

Kinnevik owns a sizeable stake in the online platform. Quikr has raised close to $441 million and has investors that include Tiger Global Management, Kinnevik, Warburg Pincus, Matrix Partners India, Norwest Venture Partners, NGP Capital, Steadview Capital, and Omidyar Network as well.

Though Quikr did not comment on the issue, the spokesperson directed to a blog by the company in January which says, "We discovered some recent anomalies in our Co-living and Cars businesses where some market players had colluded with a small number of our employees to bypass the rules of engagement and try to game the system. We’ve undertaken 3rd 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. While this has had some short term impact on us, the impact is contained within these categories and has not affected any of our other categories which have traditionally driven a majority of revenue on our platform."