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In what could be called as the ‘best valuation’ in the history of Indian ecommerce industry, the country’s largest e-retailer Flipkart raised $200 million (Rs 1,200 crore) from its existing investors, just a month after online bus-ticketing firm redBus.com raised $130 million (Rs 780 crore) from South African investment firm Naspers.
The fundraisings are being hailed as return of ‘good times’ for the country’s burgeoning online industry.
Several venture capital firms, online bloggers and firms, that Business Line spoke to, said the valuations of the Indian e-commerce firms are on the rise. However, they are also of the view that not all firms will be fortunate enough to get these kinds of valuations.
Anand Lunia, founder of venture capital firm Indiaquotient, said the e-commerce segment is at present being considered as the most hyper growth segment of the retail market. “Even as the space was written off by many a year ago, many e-commerce companies have grown three fold since then. Just because there are some failures, it doesn't make the space less attractive. The largest retail entity in the country will be an e-commerce company, not one with physical stores,” he added.
Valuations going forward will depend on general economy and sentiment, he added.
‘no fixed formula’
Sahil Baghla, founder of fan-based online merchandising firm Bluegape.com, said there is no fixed formula to decode a valuation. “Six months back, it was three times the revenues and nine times the profits. Given the kind of exit redBus got we can easily say it might have increased by now,” Baghla, who started the venture while he was in IIT Kanpur along with another fellow-mate.
However, Lunia feels that even if e-commerce grows much faster than the rest of the market, the valuation in e-commerce will remain at 2-3 times of revenue, and even higher for companies that have high margins.
“The valuations and fund raise also states that a category leader is being created. It differs from category to category travel portals and classified portals trade at higher multiples than the retail segment. In next 3 years, we see not only the Indian e-tailers but also the top global retailers to be trading at 2 to 3 times their revenues,” said Alok Mittal of Canaan Partner venture capital firm.
Without, however, commenting on Flipkart or redBus, he said valuations are very subjective but the fact that the kind of capital flow that has come into the system is commendable.
According to Mohit Bahl of KMPG, the valuations have shot up because there are very few high quality companies and multiple investors chased these few high quality deals.
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