At Rs 70,000 cr, Flipkart is worth more than bluechips BPCL, Tata Steel

One of the beauties of investing is, in the face of uncertainty, values of companies lie in the eyes of the beholder.

Thus, when it came out that homegrown e-tail major Flipkart had concluded yet another round of fund-raising, some $700 million of it, the company’s valuation was shown to have been pushed further to a stratospheric $11 billion, or about Rs 70,000 crore.

And so we pulled a list of India’s bluechip companies that are now valued less than Flipkart and it threw up many heavyweights: UltraTech Cement, Hero MotoCorp, Nestle, Dr Reddy’s, Bank of Baroda, Tata Steel, among others.

Such comparisons – between staid old-world companies with steady assets, sales and earnings and “new-age” fast-growing companies that are potentially staring at game-changing opportunities – aren’t new.

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But a more conspicuous name was oil retailer BPCL, valued by Mr Market at Rs 47,150 crore. With all of its Rs 2.6 lakh crore sales and Rs 4,000 crore profits. And this is after the company’s value has doubled this year.

Now, Investing 101 tells us how it is may be ridiculous to compare two companies with complete different business lines, operating environments, maturity of business, sales growths, etc.

But at some level, the contrast couldn’t be more striking, thanks to Flipkart’s $1 billion-$3 billion in gross merchandise value sales this year (depending on which media report you read) – or Rs 6,500-Rs 19,500 crore – and not a dime in profits.

Of course, BPCL’s highly-regulated operating environment and mature market will make sure it grows at a speed only a fraction of Flipkart’s.

But as investors pour in billions of fresh capital into fledgling e-commerce firms at ever-increasing valuations, it underscores the beauty of, and uncertainty in, investing where you have several strong arguments for and against an investment case.

Sure, Flipkart has grown at more than 300 percent while global peer Amazon, valued at more than 12 times, has grown at some 22 percent in the past few years.

And sure, at Rs 179 crore in actual net sales (not gross merchandise value - know about the difference here) and Rs 400 crore in losses in fiscal year 2014, Flipkart’s price-to-sales and price-to-earnings valuations can probably not even calculable.

However, only time will tell which argument comes out ahead. As Buffett says: “In the business world, the rear view mirror is always clearer than the windshield.”