My wife and I are huge fans of Swiggy Instamart. Reason? Well, it delivers our daily grocery needs at our doorstep within 45-60 minutes and that too with huge discounts. I ordered a big ice cream tub worth Rs 232 and paid a handsome Rs 132/- . I also order large quantities of fried chicken, kebabs and roti worth over 900-1000rs from Karim’s and have never paid more than Rs 500. This is magical.
Similarly, I get deals on Amazon prime as well wherein my delivery is free and timely, mostly a day or two. Amazon pay gives me cashback for making usual payments like buying stuff online etc. On top of that, my Amazon Pay ICICI credit card refunds almost 5% cashback on all transactions.
Now this is insane. They are paying money for things which I would have anyway paid for without worrying about cashback or rewards. Who will not pay his milk bill if there are no rewards on offer? None I believe. Will you stop paying your electricity bill or not book a ticket online for want of cashback? No.
So as far as I’m concerned, these are crazy businesses which are funding my dinners in the hope that one day in the distant future, I shall be so dependent on them that they could charge me whatever they’re splurging now. Well, they’re chasing a mirage. The day I don’t get discounts or at least the price I find comfortable with, I’ll open another app/website funded by the newest VC chasing his own version of Amazon. There’s no customer loyalty nor will there ever be.
In the world of 12GB RAM smartphones and free daily data, how difficult is it to install another app which claims a lesser price! So this whole rally in Zomato post numbers is going to fizzle out very soon and anyone who’s trying to bottom fish believes it is the bottom is going to lose his bottoms!
Let’s come to Nykaa. They’re in the business of selling luxury Beauty products and other related cosmetics to women online and for that they’re hardly making 10crore net profits for the entire year. Last I checked they have opened retail stores in order to reach out to a larger audience. Well, it means they’re trying to become an omnichannel retailer. So in other words they’re trying to do a Shoppers Stop in reverse. Once you open retail stores, the whole story of low fixed costs etc goes down the drain and you’re just another BodyShop or Shoppersstop or Lifestyle competing for the same footfall. Thus, they should be valued similarly.
Shoppers Stop has a net sale of over 2500 crores and a market cap of just over 5000 crore. Nykaa did close to 3800 crores and the market cap is 66000 crores at about 1400 rs a share. So on the test of logic, Nykaa should be valued at best close to 7500 crores Max and that will still be a valuation of over 150 price to earning. Now you don’t get that multiple even if you’re a Titan. So at a lofty multiple of 50 times earnings and even if assuming Nykaa does 100 crores profit in three years, it should be valued at close to 5000 crores market cap which is roughly 100 rupees a share.
And in the end, let’s discuss the Policy bazaar. It’s just a platform through which customers buy insurance. Of course all platforms are valuable if they make money. And in this case, it doesn’t. So for a loss making entity to command a market cap of 30,000 crore is a joke when BSE plus ISEC is under 22,000 crores. With rising interest rates, VC taps are drying out. They don’t have access to infinite cash which could fund their eternal loss making in the name of customer acquisition/habit forming/ growth!
Anyone who’s looking to dabble in Policy or Paytm or Zomato and the likes must be forewarned- All good things come to an end, even Discounts! I dread for the day when I’ll pay in full for my kebabs and milk and icecreams without cashback. It’ll be a sad day for me as a customer. However, anything which is not sustainable will end and so will these companies, atleast most of them.
PS: Amazon after its IPO at $18 per share rose all the way to $90 a share at the height of the dotcom bubble. In three years time, it was down to $6!
Life is all about Compounding! 