Skip to main content

Indian E-Commerce firms in a valuation bubble: renowned expert

Mumbai: India’s e-commerce and consumer technology start-ups, many of which have raised funds at lofty valuation in recent months, may be collectively overvalued, says Aswath Damodaran, an authority on corporate finance and valuations.
Image result for E-Commerce
While he would not hazard a guess about valuation of individual companies, taken together, the size of the macro story may not justify the micro-valuations, said Damodaran, a professor of finance at the Stern School of Business, New York University.
“I do believe that collectively, the markets that are being used to justify these valuations (online advertising in particular) are not big enough to justify the prices being paid, which I guess is a backhanded way of saying that the stocks are collectively overpriced,” he said in an interview.
Damodaran was in India to conduct a corporate finance and business valuation workshop on 10-11 August for VCCircle Network, a media and publishing company.
According to data from CB Insights, a venture capital database backed by the National Science Foundation, Indian e-commerce and consumer technology firms have raised $3.5 billion from January to June this year.
A number of these firms have seen their valuations rise with each subsequent funding round.
For instance, the valuation of e-commerce marketplaceFlipkart’s is likely to have increased to about $15 billion from less than $2 billion at the beginning of 2014. Snapdealmay be valued at $5 billion from less than $1 billion 18 months ago, according to a 11 August Mint report.
While some firms in these segments will indeed become very valuable, the challenge investors face is in determining which will be those companies, said Damodaran.
According to him, venture capital (VC) investors need to ask four questions when looking to infuse money in one of these companies: Do start-ups have a plan that goes beyond users/downloads and considers how to make money? How does the company plan to deal with failure? How does it plan to deal with success? How easily imitated is the company’s basic business model or product?


http://www.livemint.com/Companies/d3Jcm2hLqn1Xj6x2qGnIhM/Ecommerce-startups-collectively-overvalued-Aswath-Damodar.html

Comments

Post a Comment

Popular posts from this blog

LIC Buys Double as Prices Dive - 10 Aug 2011

http://licreddy.com/Content/information/insurancenews_details.asp?NewsCode=4872 LIC Buys Double as Prices Dive 10-Aug-2011 Life Insurance Corp of India, the government's institution of choice to stabilise the stock market whenever it gets wobbly, has more than doubled stock purchases in the past three days as the global debt worry-triggered selloff made valuations attractive. LIC, the country's biggest investor with stakes in L&T, Axis Bank and Grasim, will raise its secondary market purchases this fiscal as IPOs dry up with promoters not keen to sell shares at lower valuations. "We have been buying in the past few days,'' said a LIC executive involved in decisionmaking. "With the market correcting and not many public issues coming up, we would be investing more in secondary market," said the person who did not want to be identified. LIC to Invest . 50k Cr More LIC, which had been buying stocks for an average of . 120 crore in the first four...
Post a Comment
Read more

Best IELTS and English language training institutions in Hyderabad

IELTS stands for International English Language Testing System. As the name implies it is basically an English test for testing the proficiency of the language in an individual.  Training for IELTS can be taken to pass the IELTS exam or to develop good english language skills. I am giving the training institute addresses for Hyderabad. The test system is jointly managed by the British Council,IDP education ltd and University of Cambridge ESOL Examinations and more than 1 million candidates are taking the exam all over the world. The test has two versions : 1. Academic 2. General training Academic  version is for people who plan to continue their higher education by enrolling in universities in countries like US,UK,Australia,Canada,New Zealand etc.The academic institutions in these countries consider the IELTS score as a criteria for the admission process. General training is mostly for immigration purposes in countries like Australia,New Zealand,Canada etc. It may ...
9 comments
Read more

How to use home loans most effectively for tax benefits

1) Deduction on interest: If you are paying EMIs for a home loan you took to buy a house, the interest component in the EMI can be claimed as deduction. You must be both an owner and a co-borrower (in the loan) to claim tax benefits. This deduction can be claimed starting the year in which the construction of the house is completed. Suppose the construction of your house was completed on August 30, 2014, you can claim deduction for interest for the entire 12 months in financial year 2014-15. So every year a maximum of Rs. 2 lakh can be claimed for a house that you use for your own residence. If your house is rented, the entire interest for the year can be claimed as deduction. The interest payments for the year shall result in a loss under the head 'income from house property'. This loss can be adjusted against in the same year against other heads of income in your income tax return including salary. Therefore, it reduces your total taxable income and the tax you pay thereon. A...
2 comments
Read more