2. Some Indian Valuations are
Globally Competitive
Snapdeal, Ola, PayTM, Quikr, and InMobi are valued in line
with their international peers. While this fact alone does not
absolve India of the bubble argument, it does indicate that
there is a mature market path to justifying the valuations.
3. Other Valuations are Inflated,
Demanding 2x Growth
Zomato, Practo, Oyo Rooms, and Grofers seem relatively
richly valued. While there are other factors to consider
like age, growth rate, sectoral maturity, and leadership
premium, these startups will have to double their base
metrics every year for 4, 6, 2, and 8 years - respectively -
while fending off competition in order to come in line with
peers.
4. Success of Tech in India is in
Growth, not Profit1
None of the startups are profitable, but this does not count as
an insight, does it? With mature market peers of
Flipkart/Snapdeal, PayTM, and InMobi generating an EBITDA
margin of 6%, 22%, and 33% respectively in CY2014, one can
see some light at the end of the tunnel. The billion dollar
question is what comes first - profitability or bankruptcy?
Interestingly, these exact startups are also competing directly
with their international peers in India which is not the case
with others.
5. India's Key Metric: Gross
Merchandize Value
In case of 50% of the startups, the base metric is Gross
Merchandize Value (GMV). Roughly, revenues are 5-20% of
the GMV i.e. the net revenue multiple are 5-20 times the GMV
multiple. E.g. Grofers' net revenue multiple is 2,250-9,000x
depending on the % share of merchandise value used.
6. Indian Startups are Aggressively
Entering Competing Verticals
These startups are not sitting pretty on their laurels.
They're actively entering each others' space in search of more
revenues, profits, and a justification for lofty valuations. For
example, Ola to grocery delivery (Grofers), PayTM to E-
commerce (Flipkart/Snapdeal), Zomato to food ordering
(TinyOwl/Swiggy), or Quikr to real estate (Housing.com).