I am not against eCommerce. Just that I am confused by the real business of Flipkart and its lot. I am writing this blog hoping that some intelligent reader will enlighten me. Okay, to start, the total investment in Flipkart has been around $2.3 billion dollars. And yet the value of the firm is supposed to be more than $15 billion. If we create a time value for the various investments the rate of return would be astronomical.
Where has all the 2.3 billion gone? Assuming Flipkart has leased 3 million sq ft of warehouse space, and a lease rate of Rs. 20 per sq ft the costs come to around $12million per year. Assuming they employ 16000 people at an average of Rs.15000 per month the salary bill would come to be $48million per year. The company has been in existence for 8 years and it has grown rapidly only in last couple of years, so you can do the math of the total expenses. Ohh yes, this is expense as (to the best of my knowledge) Flipkart has leased all its its warehousing space and not invested in creating its own infrastructure.
In May 2014, Flipkart bought Myntra reportedly at $320 million. Myntra had 2014 yearly revenue of around $160 million and probably no profits at all. Interestingly Tiger Global and Accel Partners are involved with both Flipkart and Myntra. So its like this, the two investors invest in Flipkart, who then buys Myntra, who then pays off its investors. Amazing circle of life. Note that the total investment into Myntra has been only around $100 million.
(All my numbers are from internet based magazines and newpapers and could be completely wrong)
Hmm.....my confusion. Whats happening here?
Okay....let me predict the future. Flipkart will indulge into more acquisitions at astronomical rates. And by coincidence both Flipkart and the acquired company would have the same set of investors (directly and indirectly) .
Where has all the 2.3 billion gone? Assuming Flipkart has leased 3 million sq ft of warehouse space, and a lease rate of Rs. 20 per sq ft the costs come to around $12million per year. Assuming they employ 16000 people at an average of Rs.15000 per month the salary bill would come to be $48million per year. The company has been in existence for 8 years and it has grown rapidly only in last couple of years, so you can do the math of the total expenses. Ohh yes, this is expense as (to the best of my knowledge) Flipkart has leased all its its warehousing space and not invested in creating its own infrastructure.
In May 2014, Flipkart bought Myntra reportedly at $320 million. Myntra had 2014 yearly revenue of around $160 million and probably no profits at all. Interestingly Tiger Global and Accel Partners are involved with both Flipkart and Myntra. So its like this, the two investors invest in Flipkart, who then buys Myntra, who then pays off its investors. Amazing circle of life. Note that the total investment into Myntra has been only around $100 million.
(All my numbers are from internet based magazines and newpapers and could be completely wrong)
Hmm.....my confusion. Whats happening here?
Okay....let me predict the future. Flipkart will indulge into more acquisitions at astronomical rates. And by coincidence both Flipkart and the acquired company would have the same set of investors (directly and indirectly) .
No comments:
Post a Comment