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E-commerce Players

Valuation overview 


Founded in 2009 flipkart raised series A funding of $1mn funding at a valuation of $16mn. Followed by series B funding of $69mn at a valuation of $69mn. In 2012 August flipkart enters the unicorn club through series D Funding lead by Nasper and Morgan Stanley, raised %150mn at a valuation $1bn. On December 2014 reach $10bn valuation and the PE round investment in June 2015 take the valuation to $15bn. So far Flipkart raised $3.5bn from 16 investors to reach $15bn valuation.

 

Capital Efficiency of Indian E-commerce Majors 


There is a close correlation between funding and valuation. As per CBInsight unicorn ecommerce company’s capital efficiency ratio ranges from 1.5x – 12.9x with an average multiple 5.9x times. 

 

In 2012 Flipkart debuted in unicorn’s club with capital efficiency ratio of 5.5 x times and currently has a ratio of 4.4 times. Shopclues enjoying higher capital efficiency ratio due its lower funding requirement and focussing products in the lower price range on tier-II and tier-III markets.  
 
GMV based valuation 

Flipkart currently values in line with amazon and much below Alibaba and ebay. Paytm valuation includes its payment and e commerce business and shows higher valuation multiple. Based on above valuation multiple fairly valued compared to other Inidan e commerce peers reporting higher net loss than their net sales. 


Public Valuation of e-commerce companies 

 

At infibeam is trading at price to FY15 Annualised sales multiple of 9 times which in turn value flipkart at valuation of $13bn based FY15 revenue of INR 10,000 crore at the current exchange rate. 


Private valuation numbers are out of line 


Infibeam preferential allotments just before IPO valued INR 425 per share and lower end of the IPO price band represents a 15% discount to its pre IPO valuations. On 6th November Square Inc, US based payments company sets IPO of $4.2bn which 48% below the latest private round valuation. These trends may delay the IPO plans of ecommerce companies in term. 


Morgan Stanley write down 


Start-up valuation bubble gained momentum after the Morgan Stanley mark down the valuation of Flipkart, an Indian e commerce giant commanding 44% market share, by 27% on Mar 2016. In 4th October 2013 Morgan Stanley participated series D funding round which valued Flipkat $850mn and acquired shares at a price of $23 per share. Morgan Stanley investments in Flipkart grew 6 times over a period of two years and in February they write down only 27% of their investment value which eroded INR 25,000 crore value of flipkart. Followed by Morgan Stanley Valic ($98), T. Rowe Price ($120) and Fidelity ($82) followed the bandwagon by reducing the investment value.

Morgan Stanley’s valuation write down hits the market at point where flipkart is valuing at par with the industry average valuation multiples. Indian e-commerce GMV market size is $17bn and compared to current market size of USA $240bn and China $134bn and expected to grow $220bn in FY2030. Indian e-commerce companies required to burn $20bn over the next five years in order to reach the market size of $220bn in 2030 as per Goldman Sachs report. 


Morgan Stanley write downs has a negative impact on the fund rising activities of Indian e-commerce giants in the near term. Most of e-commerce companies are lose making and take at least 3 - 5 report profits ruled out possibility of tapping capital market for funding requirements.  


Profitability Analysis of Indian E-commerce players 

 

Except Flipkart everyone in the e-commerce space burning cash to gain the GMV market share. Snapdeal and Amazon reports loss equivalent to 1.7 times of annual sales in FY 15. 


Flipkart marching towards profitability 

In a crowded e commerce Flipkart continuously improving its revenue market share at higher phase than its competitors. Flipkart consistently improving the improving the bottom line signaling that the e-commerce giant would turn profitable in FY18. Flipkart balance sheet improving with increasing cash balance coupled with positive movement in networth. 

 

 

 

 

 

 

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Dr.Cyrus S Poonawalla

September 7, 2017

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