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March 02, 2016

"Flipkart's valuation will dive all the way down to $3.2 B": Kashyap Deorah

Kashyap Deorah, author of "The Golden Tap: The Inside Story of Hyper-Funded Indian Startups" and the former President of the Future Group's aborted e-commerce venture Futurebazaar.com, seems to be having a good time amidst Flipkart's key investor Tiger Global buying into rival Amazon and the recent write down of its valuation by another investor, Morgan Stanley.  Extracts from his latest column in Mint:
...this is the beginning of a slide that will continue until Flipkart’s valuation equals invested capital, currently $3.2 billion. 
...With 200-250% revenue growth and 20-40% operating losses, even at a reduced $11 billion, a multiple of 3-5x seems high.
...Now let us look at the funding scenario. Tiger Global Management bought over $1 billion of Amazon shares a quarter ago. Since June 2015, Amazon has grown by 50% in market capitalization, while JD.com and now Flipkart are down 30%. Amazon has the luxury of free cash flow, as is the outcome of a true e-commerce business, growing revenues while breaking even operationally. This free cash flow can keep funding Amazon’s Indian subsidiary for several more billions. Meanwhile, Flipkart needs its investors to dig deep in times of illiquidity so they can continue losing money per transaction and keep on the path of fake growth prescribed under their parents’ ambitions of e-commerce imperialism. If anything, JD.com’s Nasdaq IPO in the summer of 2014 makes Flipkart overdue by over a year now. Forgive me for suggesting that if you believe the hyper-funding party is still on, you are hung-over and the couch you are on belongs to the stranger who just left for work.
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