E-tail­ers’ heady GMV-based val­u­a­tions a bub­ble in mak­ing?

Hindustan Times (Amritsar) - - Htbusiness - HT Cor­re­spon­dent [email protected]­dus­tan­times.com

NEW DELHI: Prof­its, cash flow and sales are passé. GMV (gross mer­chan­dise value) is the new bot­tom-line. Or so it ap­pears in the world of e-com­merce start-ups that are draw­ing eye-pop­ping val­u­a­tions.

As ven­ture cap­i­tal and pri­vate eq­uity funds pump in bil­lions of dol­lars into In­dia’s fledg­ling e-com­merce in­dus­try driven by an op­ti­mism of an fast-ex­pand­ing mo­bile In­ter­net uni­verse, ques­tions are qui­etly be­ing heard: is this in­creas­ingly be­gin­ning to re­sem­ble the “dot com” bust of 2000?

Un­like text-book rules where com­pa­nies are val­ued largely on the ba­sis of prof­its, EBIDTA (earn­ings be­fore in­ter­est, de­pre­ci­a­tion, taxes and am­mor­ti­sa­tion) and ex­ist­ing and po­ten­tial cash-flows, the GMV has be­come the op­er­at­ing guide in new-econ­omy start-ups.

Flip­kart, one of In­dia’s largest online mar­ket­places cur­rently boasts of a GMV of $4 bil­lion (about ` 25,200 crore). Ef­fec­tively this means that goods worth $4 bil­lion are traded an­nu­ally through its site, in­volv­ing thou­sands of sellers and mil­lions of buy­ers.

“Our cur­rent GMV is $4 bil­lion,” a com­pany spokesper­son told HT in an emailed re­sponse, but did not re­spond to queries on val­u­a­tion and prof­its.

Snapdeal, another e-com­merce mar­ket­place that has at­tracted ma­jor ven­ture fund­ing, said that it “hit an an­nu­alised run-rate of $3.5 bil­lion GMV last month.”

“Snapdeal has grown at a rapid pace in last few years. We crossed $1 bil­lion in GMV in Au­gust 2014, $2 bil­lion in GMV in Oc­to­ber 2014 and hit $3.5 bil­lion last month,” a Snapdeal spokesper­son said in an emailed re­sponse. The spokesper­son, how­ever, said the com­pany would not com­ment on Snapdeal’s val­u­a­tions or on its prof­its or losses.

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