Bengaluru: For all its well-documented troubles, Flipkart Ltd remains India’s outstanding Internet company.
A Mint analysis of the financial statements of the country’s prime forty-one client net start-ups and corporations highlights why Flipkart continues to be the torch-bearer of India’s start-up system. The analysis also makes for a worrying scan for start-up investors or anyone optimistic regarding the state of the client net business.
Flipkart accounted for 75% of the revenues however solely forty-sixth of the losses at these corporations for the year over March 2016, the latest that numbers are accessible. The online merchant, which was valued at $15 billion in its last funding spherical in the middle of 2015, also accounted for nearly four-hundredth of the valuation of the corporations.
None of the 41 start-ups is AN early stage company; all have raised at least 2 rounds of funds from institutional investors, or Series B rounds as they are known as in start-up jargon. More than 1/2 these start-ups have raised more rounds of funds. The numbers exclude those at ANI Technologies Pvt. Ltd that runs cab hailing service Ola, which hasn’t nevertheless rumored its results for the money year 2016. In the previous year, Ola had rumored a loss of Rs755 large integer on sales of Rs418 large integer.
The analysis reveals why funding has slowed considerably for net start-ups over the past fifteen months. There’s a clear pair in the valuations and revenues of net corporations. On a cumulative basis, the revenue-to-valuation multiple of these 41 start-ups was eleven times, which for older start-ups (especially inventory-based start-ups) is a comparatively high magnitude relation. The loss numbers are stunning. The companies along rumored losses of nearly Rs16,000 core to generate revenues of roughly Rs24,000 core in the given period. Only one company, Bigtree Entertainment Pvt. Ltd, which runs ticket seller BookMyShow, showed a profit.
If Flipkart were to be removed from this list, the multiples would get considerably worse. Not that Flipkart numbers are flattering by themselves. The company’s various entities, which include its logistics unit as well as fashion retailer Myntra, reported a net loss of roughly Rs5,770 core on revenues of nearly Rs18,000 core.
To be sure, Internet businesses prefer to be valued on gross merchandise value (GMV), or the value of goods sold on the platform, and not on revenues. Many of the start-ups in the list area unit started as marketplaces, which take a cut on each dealings and not sell merchandise on to customers. Still, revenue is a more reliable range than GMV. And, most of the 41 start-ups as well as Flipkart, Snapdeal (run by Jasper Infotech Pvt. Ltd, Zomato Media Pvt. Ltd, Grofers India Pvt. Ltd and hotel somebody Oyo (Oravel Stays Pvt. Ltd) have cut monthly losses since the beginning of 2016. These companies have become throw, slashed spending on discounts and advertising, avoided thoughtless expansion and usually tried to search out less unsustainable business models.
But given that the e-commerce market showed very little growth in calendar 2016, the numbers reinforce the precarious state of India’s Internet start-ups and their venture capital (VC) backers. The unforeseen weakness in the consumer net means that the revenue-to-valuation multiples area unit guaranteed to look even additional unsustainable as valuations area unit based mostly partially on growth projections, which have taken a massive hit. Down-rounds and distress sales and look inevitable.
Flipkart’s co-founders Sachin Bansal (in January 2016) and Binny Bansal (January this year) have each lost their business executive position in the past thirteen months; Snapdeal may be a shell of the corporate it once was; and writing paper is facing a supposed down-round. VC firms have mostly avoided penalization.
No wonder then that some of the known entrepreneurs and VCs area unit job for presidency protection from the businesses (Amazon and Uber) which will still afford to work within the freewheeling approach Indian start-ups did within the go-go years of 2014 and 2015.