In the year ended March 2015, five consumer Internet companies—Flipkart, Snapdeal, Ola, Zomato and Quikr—together earned ₹ 11,778 crore in revenue.
Their composite losses are estimated to be nearly ₹ 5,000 crore for the year, according to Mint research. Yet, the valuations of these five companies put together as of April 2015 were roughly $24 billion.
Since April 2015, the valuations of Snapdeal, Ola, Quikr and Zomato as well as those of Paytm and Shopclues have all increased significantly. But a look at the actual revenues of e-commerce companies and their massive losses shows clearly that the valuations of these companies had run ahead of themselves in the funding boom of 2014-2015. Investors have accepted that, too.
Since late last year, the funding boom has come down several notches and investors have become very choosy and demanding about funding start-ups, especially mature ones such as the unicorns.
Already, Flipkart’s valuation has been marked down by four of its investors this year. Flipkart and Snapdeal are struggling to raise fresh funds at their preferred valuations. Last month, an analyst estimated that Zomato was worth half the valuation at which it raised funding in September.
One thing is clear: any e-commerce company that wants to raise funds this year will have to show it can deliver high sales growth by spending less, a herculean task. Those that can’t are likely to see their valuations chopped down or be forced to merge with peers.