Colossal losses suffered by all e-com companies
The losses suffered by e-com companies make for frightening reading.
Flipkart leads the list with a loss of Rs. 5,769 crore. It is followed by other worthies such as Snapdeal, PayTM, Quickr etc.
This is the actual pathetic state of our ecommerce companies. Barring the odd Bookmyshow,everything else on the verge of Bankruptcy. pic.twitter.com/bvps7RQGwU
— Arun Mukherjee (@Arunstockguru) February 12, 2017
Business model of PayTM and other wallet companies is not sustainable: Aditya Puri
Aditya Puri, the CEO of HDFC Bank, is the quintessential staid banker. His financial acumen cannot be taken lightly given the growth and dominance of HDFC Bank during his tenure.
Puri has bluntly described PayTM’s business model as unsustainable.
“I think wallets have no future. There is not enough margin in the payment business for the wallets to have a future … Wallets as a valid economic proposition is doubtful. There is no money in the payments business. The current loss reported by market leader Paytm is Rs1,651 crore. You cannot have a business that says pay a Rs500 bill and take Rs250 cash-back,” Puri said.
“When I talk to consumers they say only till he (e-wallet companies) gives us the cash back, we’ll go there ….. Is this wallet any better than mine, other than a cash- back? I don’t have a Rs1,651 crore loss. You eliminate the loss, then we will talk,” he added in a contemptuous tone.
Vijay Shekhar unfazed by doomsday talk?
Vijay Shekhar, the Billionaire founder of PayTM, appeared to unfazed by Aditya Puri’s concerns.
He tweeted a link to Aditya Puri’s rant and called it “#superb insights” tongue in cheek.
— Vijay Shekhar (@vijayshekhar) February 17, 2017
Vijay Shekhar also found support from influential quarters:
— Mahesh Murthy (@maheshmurthy) February 17, 2017
Paytm nearing No of Sbi accounts now .A pigeon closes eyes on seeing a cat, thinkin she doesnt exist https://t.co/5ckyy81bkH
— Haresh Nagpal (@nagpalharesh) February 18, 2017
Flipkart has “Bad DNA” & will not make it: Mohnish Pabrai
Mohnish Pabrai, the visionary stock picker, has condemned Flipkart for having “Bad DNA”. It is “not gonna make it” he declared confidently in a grim tone.
I don't short, but if I did, l'd short Flipkart. Not gonna make it. Bad DNA. https://t.co/sWYlbfJSXv
— Mohnish Pabrai (@MohnishPabrai) February 10, 2017
— Dhruva Pandey (@Dhruvapandey) February 10, 2017
— Mahesh Murthy (@maheshmurthy) February 10, 2017
— Mahesh Murthy (@maheshmurthy) February 10, 2017
First, show me Flipkart’s business model before talking about valuations: Rakesh Jhunjhunwala
Rakesh Jhunjhunwala, the Badshah of Dalal Street, was the first to recognize the unsustainable business model of e-com companies.
When the Badshah was asked whether the valuations of the e-com companies are “irrational”, he roared with contempt:
“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?”
I Am Confident Internet/ E-Com Stocks Will Crash: Prem Watsa
Prem Watsa, the self-made Billionaire who is fondly referred to as “the Warren Buffett of Canada” for his brilliant investing acumen, said he is “always amazed” at the “continuing speculation reflected in the stock prices of public high tech companies”.
“We’re confident that most of this will end as other speculations have – very badly!” is the bone-chilling prediction of Prem Watsa.
E-Com Investors Are Guaranteed To Lose Big Money: Samir Arora & Mark Cuban
Samir Arora & Mark Cuban, both whiz-kid investors in their own right, have sounded the red alert that investors in e-com ventures should bail out while they can.
Samir Arora mocked e-com investors in his typical style:
“What do you call valuations of Indian internet companies? Kehte hai isko hawa hawaii, hawa hawai, hawa hawaiiiiiii.”
What do you call valuations of Indian internet companies?
Kehte hai isko hawa hawaii, hawa hawai, hawa hawaiiiiiii.
— Samir Arora (@Iamsamirarora) March 5, 2015
Mark Cuban, an internet entrepreneur who made millions from his website, was more somber in his warning:
“If we thought it was stupid to invest in public internet websites that had no chance of succeeding back then, it’s worse today … I have absolutely not doubt in my mind that most of these individual Angels and crowd funders are currently under water in their investments. Absolutely none. I say most. The percentage could be higher” he said.
Losses of Flipkart, Amazon & Snapdeal would have allowed ISRO to go to Mars 24 times
Chhavi Tyagi & Anu Thomas of ET have conducted a detailed study to understand the reasons for the losses suffered by three of the major e-com companies, Flipkart, Amazon & Snapdeal.
The duo points out that the losses of the big three presently stands at Rs 11,754 crore and that it is “mounting at an alarming pace” and has “more than doubled in the fiscal year 2015-16”.
“While keeping up the fight is bleeding all the players and with coexistence not an option, it is time for the Big Three to change track before mounting losses bury them all,” is the grim warning issued by the duo.
Is Snapchat IPO worth Rs. 1,43,000 crore?
The astonishing aspect is that despite the sincere warnings and well-meaning advice of the old-school investment legends, the appetite amongst the new age investors for e-commerce ventures shows no signs of waning.
Snapchat, an app for teenyboppers, is coming out with an IPO in the next few days. The IPO is valued at $22 Billion which is equivalent to an eye-popping Rs. 1,43,000 crore.
Snapchat suffered a net loss of $515 million in 2016, on revenue of $404 million.
Snapchat’s top brass has made a detailed presentation on the revenue model of the Company and why the IPO is a compelling investment opportunity.
— Rami Alnajjar ♞ (@veryFatcat) January 20, 2017
If Snapchat can ask for 22 billion for losing data, MongoDB should be worth 22 trillion. Also: I hate Silicon Valley's screwed up valuations
— Michael DeHaan (@laserllama) February 17, 2017
Prima facie, it appears that the old-school investors know what they are talking about when they insist on cash flows and valuations before making an investment. The new age investors would do well to pay heed to this advice and bail out of the mess when they still can!