Rakesh Jhunjhunwala, the Badshah of Dalal Street, has maintained a studied silence on the issue of the lofty multi-billion dollar valuations commanded by e-com companies like Flipkart, Snapdeal, Quickr etc even though his peers have been unequivocal in attacking the valuations as unsustainable.
Samir Arora fired the first salvo by declaring in his inimitable style that “Investors in e-com ventures are guaranteed to lose money”. This was followed by Mark Cuban, an entrepreneur who ironically made billions from the internet. Prem Watsa also expressed his contempt for e-com venture investors by likening them to speculators and warning that it would end badly. Ramesh Damani has also made his dislike for the sector quite clear.
N. Jayakumar, whiz-kid with Prime Securities, cornered Rakesh Jhunjhunwala and demanded to know the Badshah’s take on e-com valuations.
“Would you liken this party to the 2000 boom and bust” Jayakumar asked.
“You have any doubt?” the Badshah retorted.
Asked about whether the “irrationality of valuations would catch up”, the Badshah got quite agitated and he gave a scathing response:
“Irrationality of valuations? Forget that, forget the valuation, where is the completed business model? I want to know Flipkart’s business model. I want to know how you will be profitable? Second is if you look at any company in the world, the real companies who have given returns to investors had been built by the cash flows of those businesses, not by investors’ money. When are these cash flows going to come?”
Rakesh Jhunjhunwala left no room for doubt that in his view the e-com bubble would burst sooner or later.
Now, we have to wait and watch whether investors in e-com ventures pay heed to the growing concern expressed by savvy investors or they continue with their reckless ways in pumping in billions of dollars into e-com ventures.