Post reading the announcement in the Wall Street Journal yesterday that Flipkart.com was receiving 150 million US$ funding from General Atlantic at a valuation of 1 BILLION US$, my head became dizzy, and I posted my first reaction here.
Today, with some more clarity in thinking, I just thought of pulling up the BSE (Bombay Stock Exchange) list of MID CAP Companies my Market Capitalisation and thought of listing those BELOW 4350 odd crores as a comparison, since Flipkart is valued at 1B$.
THE RESULTS ARE FASCINATING.
In simple language, Flipkart is MORE valuable than - Patni, Bata India, Tata Tele(?), NAUKRI. COM !!!!, Indiabulls Real Estate, UTV Software, JET AIRWAYS, HT Media (Hindustan Times), Jubilant (Dominos Franchisee in India), Shoppers Stop, EDUCOMP!!, India Infoline, DENA Bank, and TV18 to name just a few.
GOD HELP US ALL.
Complete list below: (source - moneycontrol.com)
Market Cap in Crores (29/7/11)
|KSK Energy Vent||3,983.42|
|State Bnk Tr||3,489.50|
|State B Bikaner||3,355.10|
|Core Projects &||3,325.65|
|Era Infra Eng||3,042.89|
|Cox & Kings||2,845.24|
|State Bnk My||2,818.99|
|Bank of Mah||2,687.96|
|South Ind Bk||2,655.65|
|Tata Inv Corp||2,644.30|
|Guj NRE Coke||2,554.75|
|Anant Raj Ind||2,409.46|
|Hind Oil Explor||2,221.65|
|Punjab & Sind||2,135.76|
|Amara Raja Batt||2,042.06|
|City Union Bank||2,001.04|
|Sun Pharma Adv||1,927.22|
|Hind Nat Glass||1,820.14|
|Nava Bharat Ven||1,752.19|
|S Kumars Nation||1,575.93|
|Motilal Oswal F||1,444.19|
The market price of these companies from the bourses show the price a person is ready to pay TODAY to get a share of the company. Valuations of FlipKart show a remuneration that the investors expect to generate in the FUTURE ... Isnt there a difference...
The comparison still is interesting...
mistake himanshu - the price of 1 billion is WHAT IS BEING PAID TODAY for a private placement - what General Atlantic EXPECTS IN THE FUTURE will be at least 10 BILLION ++
That's going to be the real big challenge
Naukri raised a small round from Keiner Perkins just pre-ipo - they knew the price just around the bend...
So maybe Flipkart is already in acquisition stage and this is a quick ticket entry and exit...
Aah agreed! The investor pours in a billion to expect more in the future. However that brings up another doubt....
The companies listed have to follow stringent norms from the bourses about their valuation and even throw their complete balance sheets to public scrutiny. Companies like Flip Kart or other startups have totally different and closed ways to estimate their true worth. I can expect valuations for FlipKart or a YouTube basis their sales trend or gained user base, but what about startups that get funded very early what are the metrics they follow? Does valuation happen more on comparison and gut feel?
Also FB for example has a gargantuan user base and we value it to billions, but say for example (and this is just an example) Google+ kills the whole party like FB did for Orkut. The online market then is very vulnerable and indecisive? How do investors calculate their risks?
some news articles say Flipkart revenues - 08-09 - Rs 4 crores, 09-10 - 25 crores and 10-11 was expected around 90 crores.
Revenue will be full cost of transaction ,cost of books.If in profit Can they earn profit of 20% on 90 crs (higher side) ? INR 18 Crores in YE 11. So valn of Rs 4500crores how much X of Profit?? Valn still more than the below??
PATNI Rev 2000crs, profit 500crores, market cap 4300 crs
HCL Rev 12000 crs profit 261 crs , market cap 1800 crs
Jet Airways Rev 13000 crs profit 9 crs market cap 3800 crs
But if you see NAUKRI.COM it may seem possible
Infoedge (naukri.com) Rev 300 crs profit 90 crs market cap 4000 crores
Satish - to make the exit for General Atlantic (10x), and taking Naukri as an example - (where the PE is 40), the achieve a market cap of 45,000 crores for Flipkart , the PROFIT WILL HAVE TO BE 1000 CRORES
Now, 10 B is 1/10th of Amazon mcap.
So, to earn a NET OF 1000 crores on Book/Video/ etc at a 5% margin, Flipkart will need to sell 20,000 CRORES of stuff...
(Ps - the comparison with youtube/foursquare/twitter/FB/linkedin is that FlipK is NOT an innovator on a platform nor first mover)
If duties come down to rational levels, then why cant amazon and zappos ship to india like they do everywhere?
I guess im too old fashioned for FlipKart and too forward looking for Zynga :-))))