Investors value Flipkart at 5 times its sales

Private equity investors such as Morgan Stanley Investment Management, Sofina, Vulcan Capital and Dragoneer Investment Group, along with Flipkart’s existing investors, have valued the online retailer at five times its sales and acquired about 10 per cent stake through a $160-million (Rs 990-crore) deal announced on Wednesday, say investment bankers in the know.

“The company is doing sales of around Rs 2,000 crore and investors have valued Flipkart at five times that amount. At $1.6 billion (Rs 9,920 crore) valuation, they have picked up 10 per cent stake in the company,” said an investment banker on condition of anonymity.

Through Wednesday’s deal and the two tranches of fund-raising the company carried out in July 2013 and last year, founders Sachin Bansal and Binny Bansal sold about 40 per cent stake in the e-commerce player, the banker added.

BAG FULL OF GAINS

• The company is doing annual sales of around Rs 2,000 cr and investors have valued Flipkart at five times that amount
• Founders Sachin Bansal and Binny Bansal  have sold about 40 per cent stake in the e-commerce player till now
• The Bansals apparently needed the money for working capital which they urgently required to manage their back-end operations

When Contacted, Morgan Stanley declined to comment.

Since the Bansals had raised $31 million between 2009 and 2011 and the potential value of those deals wasn’t known, the exact promoter holding in the company isn’t known. “They need money for working capital, which is urgently required to manage their back-end operations,” the banker said.

In July this year, Flipkart’s existing investors Naspers, Accel and Tiger Global invested $200 million (Rs 1,200 crore) in the company, valuing it at about $1.5 billion (Rs 9,150 crore according to the exchange rate in July). Through this round of funding, Flipkart, diluted 13 per cent stake in the venture, banking sources said. In 2012, Bansals raised $150 million from investors such as Nasper, Tiger Global and Accel Partners, which valued the company at $850-$900 million. Considering such valuation, Bansals had sold 16 per cent stake in the company, banking sources said.

When contacted, Sachin Bansal said, “We do not talk about sales or valuations at all. All we are saying is we are on the way to achieving gross market value of $1 billion by 2015 and we have already crossed the halfway mark.”

Anlaysts said Flipkart’s valuations reflected the sales numbers it was posting. “If they are doing sales of half a billion, they are close to that kind of valuations…the real enterprise valuation must be higher,” said Abneesh Roy, associate director (institutional equities research), Edelweiss Securities.

“Normally, e-commerce firms such as Amazon, Baidu.com, etc, have high valuations because of high growth rates. Since Flipkart grew 10 times in the last one year, investors must be putting their bets on that,” Roy said.