Thread by @FCSJigarShah

Are #Startup valuation any way justified?

Closing price of #Zomato on #BSE today was Rs. 132.60 at this price, Market cap of Zomato (Total valuation of Company) is at Rs. 1,04,027 Crores. Which means #Zomato is already in top 50 Companies of India market cap wise (1/n)

#GodrejConsumer which was listed on 18-06-2001 and having a track record of giving constant profit for atleast 10 years (screener.in/company/GODREJ…) is valued just below #Zomato. despite comparatively much stronger performance and track record of Profit and Dividend (2/n)

On the other hand #Zomato has accumulated loss of 56,00,30,00,000 INR (Source: Zomato RHP - in INR Million) as on 31/3/21 and still it is valued at such a higher price. Zomato is valued higher than #TataMotors #Britannia #BergerPaints to name few (3/n)
moneycontrol.com/stocks/marketi…

Main reason why many fundamental investors are staying away from #Startups. But Valuation mechanism for these Cos is different from traditional cos - Right or wrong no one knows but when Public approves, everything is justified.

Even many industry stalwarts are not happy (4/n)

But real question is, why companies like #PayTM #Flipkart are getting crazy valuation despite losses? Yes there is an art of calculating value at #DCF method & all future profit discounted at current price gives higher valuation despite losses so you get any valuation (5/n)

and of course these companies are getting valuation because they have identified a big vacuum. #Internet has changed the world in last few decades and these app based Companies have that scalability and reach thanks to Mobile and Internet (6/n)

But most importantly these Companies are going to shape next generations choices
Eg: (not necessary they will manipulate)
#Zomato #Swiggy : Fooding habits
#Flipkart #Amazon : Shopping habits
#Cred #PayTM: Spending and Financial aspects
#Byju's : They have future generation (7/n)

what these companies can do with data they have is beyond imagination even today.

they exactly know What a person does when he is happy or sad or while travelling TO how they spend money or what they look in detail what they ignore

Everything "officially" at their disposal(8/n)

While technically it may look how crazy #VCs are, giving valuations in Billions for pre-revenue cos but they know what they are investing for and what it is worth of.

Plus we never know what all additionally other apps can do (without officially letting people know).

(9/n)

Getting in Mobile of users is a costliest real estate today and to get in even 50% of 1.3 Billion Indian users and let #AI do its magic - No value is smaller, provided it knows how to use it.
Eg: A notification can lead to 1 year sale of busiest shop in India in few hours. (10/n)

#Startups is future and not a bubble, while many companies getting crazy valuation may fail but those who will succeed, might grow as big as #Google, #Apple of India. #WinnersTakesAll funda.

PS: It is just a perspective on Startup and not an Investment advice. (11/n)

Also, this thread is not to tell that which company is good or bad but its an attempt to discuss the current reality from my point of view.

May be valuation of these companies are looking crazy coz we don't understand it completely. (12/12)