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Change In The Concept Of Valuation In The New Digital Age At 9th India Digital Summit, IAMAI

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Valuation can simply be defined as a process of calculating or estimating the worth of something. It is usually done for assets (like investments in intangible assets or marketable securities) or for liabilities (like bonds issues by the company). It is done for myriad reasons like for defining and analysing capital budgeting, investment analysis, financial reporting, analysis of merger and acquisition transactions etc.) However, valuation is now digitized and is changing its definition with New Digital Age.

IAMAI organized 9th India Digital Summit in New Delhi, where a session captured key aspects of the changes coming up in the concept of valuation in New Digital Age. This panel discussion bestowed a lot of insights to the participants who witnessed it and came up as a complee refreshing experience for the audience.

The session was moderated by Vijay Shekhar Sharma, Founder, One97 Communications Ltd. During the session, Vijay raised a lot of insightful questions in front of the panelist in his very entertaining style. Few inputs provided by the panelists during the session are mentioned below:

Aashish Bhinde, Executive Director, Digital Media & Technology, Avendus Capital
  • Valuation is a science as well as an art. It depends on ‘what kind of a company it is?’, ‘What is the environment of a company?’ and so on.
  • There is a very first and foremost principle to decide about valuation of a company. It is the fundamental based valuation analysis and it surely depends on the team as well and prefer a team which possess an opportunity to lead the market. However, the risk adjusted for cost of capital for valuation play a major role.
  • Many professional keeps an attitude that h/she will get out at a stage, say in 15 years while there are others who say I am not getting out of it. So, all these things do matter for a person who is doing valuation for your company. However, it is the art for the one who is seeking a valuation.
  • We built up a digital practice 3 years ago and that time market was going very low. So, I think we in some way had to take a call, that which company we should work with as it was important for us to work with the companies who were supposed to get big in future and fortunately we got opportunities to work with BookMyShow and RedBus etc.
  • Indian market is as big as any other market and it will go big in 10 – 15 years. However, somewhere between 10 – 15 companies will come billion dollar company in 3 – 5 years.
Anshoo Sharma, VP, Lightspeed Venture Partners
  • Professionals who do valuation consider two key elements. One is the market that the company is targeting and second is the team, which helps us in defining valuation. If the market is big, which also means business model then that can value investment. You need to give a runway to a company for valuation.
  • Market is very important and there is no point of hiring an entrepreneur who is not focussed. So, great entrepreneurs is one of the positive quality for valuation.
  • It is evitable that Indian market will go big in 3 – 5 years. Around 30 companies will come up as billion dollar companies in 3 – 5 years while China will come up with 200 – 300 companies as billion dollar companies.
Harish, Founder and Chairman, Smile Group
  • The bull is on which depends on demand and supply. If you have a business where money works as a key taker then it’s fine to raise money 2 – 3 times in a quarter also. Raising money is a part of running a business.
  • What defines an entrepreneur is a simple statement in itself which is ‘he know what he wants to do’.
  • A lot of times, we can posture that we understand the map but the time we get into it and become a part of a team, we have to get it done by any means.
  • Along with art there are two more elements. One is ‘sentiment’ and second is ‘inspiration’. If I am inspired, automatically valuation goes up.
Sarbvir Singh, Managing Director, Capital18
  • Team is very important but what more important is an entrepreneur. It is more of sales job. If you seek money, you have to inspire a person who is providing valuation. You have to convince him that both of us will create magic together.
  • Sentiment is an uncontrollable emotion and eventually most giants started in situations like recession etc., so what matter is how you can inspire the person who is providing valuation.
  • When Google went public 20 times of its revenue grew, so what I mean is that these people had a talent to see and analyze future. It is not that people are nuts, there is a reality to their decisions.

“You underestimate things that are for long run and overestimate things that are for short run”- Bill Gates

  • In India TV advertising is just few fractions of the market of US or China. It is not that we have less people to watch TV but it is nature of our market. I am optimistic that in future it will have lot of opportunities to make many billion dollar companies but defining it in few recent years is difficult. It is just the nature of market.

To conclude, this session covers all aspects of the concept of valuation in new digital age in a unique style of industry experts from various domains.

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