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eCommerce Startup Valuations under Scrutiny

January 16th, 2017

india ecommerce valuationsIn recent months, the supply of capital has tightened, making some of the Indian Internet companies in the hyper competitive segments settle for lower valuations.

Companies, such as Housing.com, Jabong and Commonfloor, were sold at a valuation lower than their last funding rounds. Myntra acquired Jabong at nearly one seventh of its last announced valuation a couple of years back. Fabfurnish was sold at a distressed valuation of US$3 mn to Future Group—the company had raised US$30 mn in three rounds until 2014. Housing.com is valued at about US$70-75 mn in the recently announced merger with PropTiger (it was valued at over US$200 mn in the earlier rounds in 2014).

While companies such as Snapdeal, Hike, Shopclues and Bookmyshow managed to get decent valuations in their funding rounds during 2016, we believe that valuations have been subject to greater scrutiny and this could also be one of the reasons for a lower number of large funding deals in recent times, in our view.

Although Flipkart has not raised any fresh money since July 2015, there have been several instances of markdowns being booked by its investors – in the range of 30-90%. During the past one year (Jan-Dec 2016), the performance of Chinese internet stocks was mixed: Tencent and Alibaba were up 24% and 8%, respectively, while Baidu, JD.com and
Vipshop were down 21%, 13% and 28%, respectively. This could have partly influenced the markdown by investors.

Similar markdowns have also been witnessed in other parts of the world. For example, Fidelity had marked down its investment in Snapchat by 25% in November 2015. Similarly, BlackRock marked down the value of its investments in Dropbox by 24%.

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