The big 10 Ecommerce companies have done good job of creating a hype by giving numbers which are very confusing. When they sell a mobile worth 10,000, it their partner who is selling and in which they make very very little or nothing. The day they plan to change this towards making more money there would be other companies with similar model with good fund. When questioned about FDI they say they are ecommerce companies and merely providing selling platform. The day Reliance or big baazar comes into competition, they will find it very tough. The kind of valuation these 5-7 companies are getting are really very dicey. That way the valauation of IRCTC should be billions and billions of dollars.
Re: Quite Confusing
by rajeevan on Jun 23, 2015 03:59 PM
My thought (not with any data) is These companies get billions of dollar in their account through many transactions. If no sales for 2 days, account will have zero $, after paying to all vendors
Re: Quite Confusing
by Raj on Jun 23, 2015 05:09 PM
Most of these valuations (Snapdeal, Flipkart, Ola, Paytm) are based on expected earnings in the future.
The e-commerce industry in India is in a very nascent stage (less than 5% market penetration). It is expected to grow exponentially over the next few years, and this is why investors are pumping in money.
You have to understand that valuations are not based on current revenue, but on expected revenue.
And expected revenue factors in several variables including mobile internet penetration and rising disposable income...and on the basis of these forecasts investors value the company.
Today, if you want 10% stake in Flipkart, you'll have to pay 9000 crores. Flipkart doesn't make even 9 rupees in profit now. But that doesn't mean it can't be valued at at $15 billion.
It requires long-term investment perspective. It's not very different than a Warren Buffet putting in money into Coca Cola...Warren Buffet is rich today because he had the foresight yesterday. The people who have invested in Flipkart, etc. will be extremely wealthy in a few years.
