E-commerce defies conventional laws
Basic principles of finance have not changed that much in the last century: Businesses exist to make profits and generating positive cash flows is important.
Given the recent developments in the e-commerce space, several ‘old school’ finance professionals are unsure whether the ‘universal’ and ‘time-tested’ principles will ever hold good in the future. Valuations of most e-commerce deals in the recent past have been at astronomical levels, most often expressed as several multiples of sales. It’s common knowledge that virtually every e-commerce company in India is losing money today. So, why are investors paying a sales linked multiple (and a premium at that!) for buying into a loss making company.
Co-founder and Director, MyCFO
Cash flows can be the one of the strongest indicators of an e-commerce business’s success or failure.
Cash flow in simple terms is the difference in time between when you get paid and when you pay. The sector has been in the news and is seen as one of the fastest growing amongst new age industry sectors in the next decade. With significant foreign investments in the sector in the last three years alone, Continue reading
There has been huge expectations from all sides since the new Government has been sworn in. In a bid to reignite the economic engine and make it chug along at a faster pace, the Government is trying to bring in legislations that it thinks will positively impact foreign investor confidence. The recent buzz/speculation around FDI in e-commerce industry is one of the most discussed topics.
While the brick and mortar traders have been and will continue to oppose the move, since they believe that it is likely to cannibalise their business, what has come as a surprise is the opposition this proposed change in policy is facing from the Indian giants in the e-commerce business. Continue reading