Interesting coverage on rediff – its now at $24M enterprise value. As much as for a long time, Rediff commanded high valuations that few could explain, it now seems to have gone in the other direction. Would love to get people’s views on whats happening here.
As a bellwether for Indian internet industry, these numbers reset expectations on the entire sector and near term expectations. Naukri is just over $200M on EV, which I do believe is healthy because of their earnings (P/E ~ 20).
I also wonder what series B valuations for Internet companies would be now – till 12 months back, companies with less than 200K users and zero revenues were getting $24M valuations…
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Totally agree Jaspreet – if startups were to be valued on P/E, they’d pay investors for participating 🙂 None of the companies mentioned above (rediff, naukri, google) are startups though…
Alok, companies like google enjoy a PE over 45-50.
IMO, unlike public companis,the valuation for startups (specially < 3 years) is much more than PE as they havn’t realized full potential.
Krish – $55M is the target EV for the business as per the report – the current is indeed $24M,
the evaluation of rediff may not be fair.
Wait for the year to end, even this number should seem steep. [BTW that report puts Rediff valuation at $55 MM, not $24 MM as you do].
In these turbulent times when valuation paradigms are shifting fast, do the old norms like PE multiples still hold? Who can guarantee a Naukri.com continuing to earn EPS of Rs.21 (which is trailing 12 months number) going forward? In the same vein, how can one be sure if it will be rewarded with a 20x that it commands today? How are we to judge the direction of realistic online ad spends that should benchmark the revenue prospects of these firms? McKinseys of the world will eventually come up with some numbers but we all know they do that for a living. Till then we all go by broad indicators – major online advertisers like Airlines and Automobiles declaring consistently bad quarterly numbers. India’s IT vendors that spawned recruiters by the dozen, major users of Naukri, are no longer bulk hirers they used to be and that spells bad for recruitment portals en masse.
So what’s left? The only respectable valuation parameter is the old fashioned revenue/profitability growth supported by real cash flows and that leaves not many players in the fray. That scarcity should promise some valuation upside, if at all.
Valuation is no longer a founder’s (or seller’s) prerogative as it used to be. The investor’s (or acquirer’s) endorsement is respected more now. A simple guide currently followed by leading PE investors is to cut current stock price by half (invariably means halving EPS and PE multiples as well) to arrive at fair value over next 12 months… That explains the incidence of fewer transactions as well.
Message to investors – don’t hurry into series B, you can badger them down still 😉