Valuations are a theoretical exercise, always!


Sachin Bansal was recently quoted saying valuations are a ‘theoretical exercise’ and not based on any transactions, and he is not worried too much about the markdowns by a few of investors. Well, Sachin is right when he says that about valuations. But I wish he had said a similar thing when investors were pushing up Flipkart’s valuations based on those theoretical estimates and assumptions.

Flipkart being the poster-boy of Indian e-Commerce, this markdown comes out heralding some harsh truths about the times we are into. And this makes it utterly important to understand what just happened and how did we reach till this stage, and then where from here?

So, the story goes something like this – Till the end of year 2015, e-commerce businesses were valued on the basis of GMVs, meaning irrespective of how much bribe you give away  to your customers in order to make them purchase, all that matters is that what was sum total of the Max Retail Price (MRP) of all the goods sold. I personally prefer calling this phenomena as – Buying your own revenue. Basically you are paying something from your pocket in the form of Discounts, Cash Backs, Promotional Offers, etc to make a customer cheaply own the product sold by you. So, the entire Indian e-Commerce was gung ho about transaction count without being realistic about the money lost to buy those transactions. And for doing such a ‘sinful’ thing, these companies were getting valued more and more.

And while all the players were busy buying their revenue (or transactions) and hence pushing their valuations up, someone somewhere was trying to do some enquiry into the valuation benchmarks across the globe, and found out some contrasting numbers, like the ones below:

  • Flipkart’s GMV was anywhere between $5 – $7 billion, meaning it’s MarketValue/GMV was somewhere around 2.2x – 3.2x for its $16 billion valuation.
  • Alibaba’s GMV for Q1 2016 was $115 billion, the annualized value for 2016 being $400 – $450 billion. Its current market cap is close to $200 billion, meaning MktCap/GMV = 0.5
  • Etsy (an online marketplace for handmade goods) total GMV in 2015 was $2.5 billion. Its currently valued at slightly less than $1 billion. MktVal/GMV = 0.4
  • Walmart’s revenues in 2015 was $480 billion. The GMV must have be higher than this considering the discounts. However, its current valuation is just higher than Alibaba at $215 billion. MktVal/GMV = ~ 0.4

Considering that Flipkart is a late stage startup, its valuation should not be more than 0.5x, or at best stretched upto 1x times the GMV.

Once anyone does this calculation, he would be of the opinion that previously some massive blunder has been made, and will immediately change his mind on the valuation numbers crowned to these e-commerce players.

And thus, the goalpost got shifted. And that is why you hear Kunal Bahl of SnapDeal suddenly talking about cutting costs and adding more categories like air-ticketing, etc. And he claims that they are redefining the m-commerce space.  The reality is however different from what Mr Bahl is trying to impose.


Its no more a question of how, rather its a question of when the valuation markdown of SnapDeal and other poster boys from other niche segments will start appearing in public. And the only option these guys are left with is to exercise their options to remain attractive in the public view. Like, SnapDeal has recently made up it’s mind to buy out the distressed asset at a throw-away price (and hence save the face of Mr Nikesh Arora and SoftBank). But will such distressed asset buy-outs really help restore or defend their valuation figures? Only the time will tell.

So who must be laughing at all these valuation shifts and distressed asset buy-out plans just to defend their valuations and ‘perceived’ market position? Probably two guys must be loving the whole situation – Amit Agarwal, the CEO of Amazon India, and Rahul Yadav, ex-CEO of, for reasons better left unsaid 😉



Juggernaut: A Publishing experiment

Jauggernaut App Launch

If you have ever loved reading, you would sense the thrill and joy of seeing a new book. I still salivate at the very thought of reading a book. No wonder a time came in my life when I was carrying more books than clothes, utensils, and other stuff combined together. And for a nomad like me, it started to make sense to switch to a technology which saves this regular effort of carrying books from one place to other. And hence a point came in my life when I switched to Kindle, and so far its been a wonderful companion. No more hassles when I shift my house or travel for unknown number of days. My books travel with me 🙂

But is Amazon Kindle a success because of its light-weight, or long battery life, or e-ink technology? Isn’t all this a part of technology which everyone can replicate? There has to be something more than just technology. And this fact becomes even more evident when you realize the fact that companies like Sony tried to come up with e-readers long before we saw Kindle, and even to this date there are so many companies which are trying their fate in this new era of digital content selling and distribution, like Rakuten’s Kobo or Barnes & Noble’s Nook, these all companies have not got the use acceptance they aspired for. And the reason for their lower acceptance rate vary from low range of books available in their bookstore, to the high price of their devices, to the poor partnerships by publishers to exclusively tie-up with them.

And while all this competition among eBook readers was on, we got a new creature to deal with – The SmartPhone, which claimed to replace all other screens in our lives. And to a great extent it has been really successful in replacing every other screen from our lives. So how did the digital publishing industry survive? Instead of fighting the SmartPhone screen, they got friendlier with them – they created Apps which could replicate the experience of their eBook reading experience on their devices, while keeping everything in the background same. Still the game didn’t change – Amazon still controls the largest share of the market for one simple reason – It has the largest content repository and is most accessible buying platform for the whole world.

So how can someone make a place for itself in such a market? I am sure someone must have asked this question while thinking of starting a Publishing company like Juggernaut. When I heard about this company I was immediately interested in learning what these guys are trying to do, and how. I learnt that this company has been started by Chiki Sarkar who has been associated with publishing industry. The company is headed by Durga Raghunath, who has been in Digital Media and Publishing for over a decade now. And to top it all, they have by now acquired a set of high profile people and writers to contribute to this project. I am sure there is something great cooking here 🙂

Their business model orbits around the core idea of making content readable on mobile devices and distributing it among the  contemporary youth and other readers whose tastes are fast changing.

In past many months I have been receiving a weekly newsletters from them which speaks a lot about the quality and variety they are trying to offer. I am indeed pleased that a modern day publishing company from India is trying its best to develop a great network of content creators,  distribution channel by leveraging technology, and aiming at audience who can easily afford this content. I am sure there is some great innings about to start with this publishing company’s App which is due for release on 23rd April 2016.

I am willing to see how quickly they can churn out engaging content and how soon they master the art of creating something for everyone. I am absolutely hopeful that these guys are on the verge of creating a history in Indian publishing.

Juggernaut, I am with you in this brave experiment you have taken up. Bring it on, I will excuse my Kindle for the sake of empowering this Indian experiment.