e commerce companies

Well, some names that come readily to mind are Info Edge (India) Ltd, Vaibhav Global, Izmo (Logix Micro), Intrasoft etc. Buying their shares could be investing or speculating, depending on the valuations that you pay for them. Each one of them has a business model and a revenue model and it is a question of correctly evaluating what the stock is worth.

 

Well, the popular ones, if you go by what some well-known investors are buying, are Palred Technologies, Izmo, Vaibhav Global, Intrasoft and Info-Edge.

I don't think these businesses are being valued on the basis of their present profitability but on the basis of their "scalability" and what the profit could be when the company achieves its full potential. The business model requires huge cash discounts to be given to the customer to wean him away from traditional shopping methods. So, there is a lot of "cash burn" and "losses" expected to be incurred in the business model.

In fact, even Amazon, which is one of the first and oldest listed company in the USA is not entirely profitable even as of date though several years have passed since its inception.

The other thing that the investors in ecom companies are banking upon is the impending IPO of Infobeam. That may create some hype in the sector and send the valuations upwards.

The question of a "fair valuation" at present does not arise because as I said earlier most of these companies are not profitable/ have low profit. The valuations are based on the "future scalability and profitability" There is a lot of crystal-gazing involved in determining the valuations.

Whether the business is "long-term sustainable" and whether there is a "moat" is difficult to say. The business model is per se a simple one in the sense that you are creating a "market-place" for local vendors to sell their products. So, anyone with the ability to raise huge funds can be a potential competitor. In fact, the intense competition amongst the existing e-com players, Amazon, Flipkart, Snapdeal, Infibeam, Shopclues etc apart from local ones like Localbanya, Bigbasket, Pepperfry, Grofers, meragrocer, freshfalsabzi etc is an indication that there is no moat. The customer is ultimately concerned with the largest discount that he can get and this creates cut-throat competition amongst the vendors.

 

Local Banya itself has a large number of competitors. This gives you an ideal of what the "moat" is in these businesses.

• www.bigbasket.com/
• www.aaramshop.com/
• www.zopnow.com/
• www.peopleeasy.com
• www.gopeppers.com/
• www.aapkagroceries.com/
• www.aapnamandi.com/
• www.bachatmantra.com/
• www.kiranawalla.com/
• www.bazaarcart.com/
• www.rationhut.com/
• www.westaple.com/
• www.youmart.in/
• www.greencart.in/
• www.localkiranastore.com/
• www.onlinegrocerybazaar.com/
• www.onlinesabjiwala.com/

In the regular products category, there are competitors like HomeShop18, eBay, Indiatimes Shopping, etc.