The project analyses the mergers and acquisitions that have happened in the e-commerce industry and tries to comment on whether the valuations are justified. It also discusses the sustainability of the current discount model the industry is following.

1. E-Commerce in India:
Mergers and Acquisitions
Perspective
2015

2. 2
SUMMARY
E-commerce is the new buzz word in the business scenario and if we count in the rate at which internet
penetration and purchasing power of the average Indian consumer is growing, this model is here to stay. Lot
many deals are happening in the e-commerce market space and the high valuations are what catch the attention.
With so many investors investing billions of rupees in the firms which are registering heavy losses every year,
is expectation of a good future the sufficient reason? When Amazon started, the customer was more loyal to the
firm but in the present, consumer loyalty ratings are dwindling with each one looking for a better, less
expensive offer.
The various mergers and acquisitions happening in the e-commerce space are multi-million dollar deals with
little or no due diligence behind them.
Are we heading into an inevitable E-commerce bubble burst?
The report analyses major deals that have happened in the E-commerce market space and comes up with the
parameters that need to be considered before investing in the acquisition of a firm.

3. 3
INDEX
Topic Page No.
Introduction 06
Growth: Organic or Inorganic 07
Due Diligence 08
Assumptions for Valuation Analysis 09
Parameters for Valuation Analysis 09
E-Retailing SectorAnalysis 11
E-Travel SectorAnalysis 14
Other e-Commerce Deals Analysis 17
Conclusion 20
Bibliography 21

4. 4
List of Tables and Figures
Table Name and No. Page No.
Valuation Factor Calculation: Table 1 10
Flipkart-Data Analysis: Table 2 11
MakeMyTrip-Data Analysis: Table 3 15
Mahindra Retail-Data Analysis: Table 4 17
Yahoo- Data Analysis: Table 5 18
Figure Name and No. Page No.
E-commerce Industry Segmentation: Fig 1 05
Positioning of Value Chain: Fig 2 07
Flipkart-Data Analysis: Fig 3 11
MakeMyTrip-Data Analysis: Fig 4 16
Mahindra Retail-Data Analysis: Fig 5 18
Yahoo- Data Analysis: Fig 6 19

5. 5
1) INTRODUCTION
Over the last two decades, rising internet and mobile phone penetration has changed the way we communicate
and do business. E-commerce is a relatively novel concept. It is, at present, heavily leaning on the internet and
mobile phone revolution to fundamentally alter the way businesses reach their customers.
In 2013, in a survey conducted by PwC, Asia-Pacific emerged as the strongest business-to consumer (B2C) e-
Commerce region in the world with sales of around 567.3 billion USD, a growth of 45% over 2012, ranking
ahead of Europe (482.3 billion USD) and North America (452.4billion USD). Since the e-Commerce industry is
fast rising, changes can be seen over a year. The sector in India has grown by 34% (CAGR) since 2009 to touch
16.4 billion USD in 2014 (2). The sector is expected to be in the range of 22 billion USD in 2015. (1)
The composition of the e-Commerce market can be given as:
(2)
Fig 1: E-commerce sector segmentation
The size of the e-Tail market is pegged at 6 billion USD in 2015. Books, apparel and accessories and electronics
are the largest selling products through e-Tailing, constituting around 80% of product distribution.
The internet user base in India is 243 million which amounts to a penetration of 19%. The mobile user base in
the country stands at 1 billion with a smart-phone penetration of 30%. The projections go as far as expecting
India to form 12% of the global smart-phone market with a 65% penetration by 2019. (1) All these factors
strengthen the belief that e-Commerce will get a big boost in the coming future until of course m-commerce
takes away the charm.
Around 75% of Indian internet users are in the age group of 15 to 34 years. (1) This category shops more than
the remaining population due to several reason which include: peer pressure, rising aspirations with career
growth, fashion and trends etc. all of which favour an e-Commerce growth.
With the change in government, business confidence has significantly improved which is evident in the
improved Sensex. In 2014, investors aggressively funded the e-Commerce sector due to strong growth
71%
20%
5%
4%
Travel Agencies
Retail and Market Place
Financial Services
Classifieds

6. 6
prospects. Several of India’s blue-chip PE firms, which previously avoided investing in e-Commerce, are now
looking for investment opportunities in the sector.
With all these factors in consideration, we will be defining the parameters to measure the effectiveness of the
valuations done in the report. We will also analyze some of the deals that have happened in the e-Commerce
market to ascertain the existing trends that are present in the market.
2) GROWTH: Organic or Inorganic
a) Parameters for Comparison
i) Customer Behaviour: The customer base in e-commerce is not loyal with a customer loyalty of just
39% (3). Also, with the excessive marketing budgets and discount offers involved, Customer
acquisition cost is very high. Thus, inorganic growth is favoured.
ii) Time to Grow: With the increasing competition, any firm cannot take a long time to consolidate its
product variety. Hence, it is better to acquire other businesses to acquire their customer base.
iii) Value Chain requirements: The value chain requirements for the different segments are as under:
(1) Value Chain Components for Travel Agencies
(a) Suppliers: Modes of Transports
(b) Process: Website interface and software development
(c) Marketing Platforms: Mobile apps, online advertisements and social media
(d) After Sales: Technical Support Centers
(2) Value Chain Components for Retail Agencies
(a) Suppliers: Third party suppliers
(b) Process: Website development, Payment Gateways, Logistics and Distribution Network
(c) Marketing Platforms: Mobile apps, online advertisements and social media
(d) After Sales: Return Services (Logistics)
iv) Profit Margins: Most of the companies are currently running in losses. The only factor that is
keeping them going is the investor trust and hence flowing cash into their system. A detailed
analysis of the same is done sector wise later in the report.
b) Conclusion
All the factors mentioned above favour inorganic growth with more focus on vertical integration.
The positioning strategy for the value chain can be defined by the diagram below:

7. 7
Fig 2: Positioning of value chain
However, whether the financials of the company allow the inorganic growth or not will be seen in
the report later.
3) Due diligence in e-Commerce
In India, most of the e-commerce stakeholders are not complying with the legal requirements as prescribed by
the various laws. Even investors are investing money without ensuring that the e-commerce companies are
abiding by the law. Perry4Law (an exclusive techno legal corporate, IP and ICT Law firm) believes that cyber
law due diligence is an absolute must for foreign investors in e-commerce and technology ventures of India.
Right now there is no e-commerce law of India, because of which unfair trade practices and predatory pricing
tactics prevail in the market.
The most common ecommerce due diligence mistakes are:
1. Not realizing the difference between online (ecommerce) due diligence and traditional due diligence.
2. Taking information at the face value.
3. Not looking into owner’s other business ventures.
4. Ignoring the external factors.
5. Not knowing what to look out for.
6. Ignoring minor red flags and not looking at the big picture.
7. Failing to ensure revenue streams are transferable
The most important due diligence questions that need to be asked before undertaking an acquisition are: (4)
1. Is the site going to remain useful in the future or is it one-off thing?
2. Does the business depend on a particular loophole or “trick”?

8. 8
3. Would you actually use the site?
4. Would you be able to market the site without organic traffic?
4) Assumptions for Valuation Analysis
a) All the financials taken in the report have been taken from Capitaline with the assumption that whatever
is available is the only and correct data for the respective company.
b) One important point to be noted is that Flipkart is not a listed company but has still shared some of its
financial data online. The same was available with Capitaline.
c) The cost of goods sold and operating expenses have been derived by considering the trend of Industry
giants namely Amazon, Groupon and Yelp. Since the valuation of Flipkart and other online retailers is
done on the optimism that they would also perform like the former three, the same trends have been
extended to Indian online retailers as well.
d) The value for most of the deals done prior to 2012 is unknown as no deal data has been shared. Most of
these companies are now defunct due to 100% acquisition and were brought when their customer base
was declining. Hence, considering the common business acumen, we assume that these companies have
been valued by a factor less than 1 as is the general trend for the e-commerce industry.
5) Parameters for Valuation Analysis
The parameters for analyzing the valuation are the
a) Financial situation of the buying company: To be discussed specific to the companies for which data is
available.
b) Expected synergies: Will vary as per the rationale behind the acquisition and hence will be company
specific.
c) Financials of the acquired company: Will be company specific; a general trend which is depicted
below shows that companies with growing sales and customer base are over-valued by a factor of 4.8
with certain valuations going as high as 20. The companies which are added only for their strategic or
operational importance and have been performing poorly as per the financials are usually valued under
1.

9. 9
Name of the
Acquirer
Name of the Acquired
Company
Deal Value
(INR)
Stake
Acquired
Valuation of
the Acquired
Company
(INR)
Annual Sales of
the Acquired
Company
(INR)
Valuation
Factor=
Valuation/Sales
MakeMyTrip
Luxury Tours and Travels 3000000 79% 3797468 2700000 1.4
My Guest House
Accommodations 1000000 29% 3448276 1800000 1.9
Ixigo 18500000 76.60% 24151436 4000000 6.0
EasytoBook 5000000 100% 5000000 136000000 0.04
Thomas cook Sterling Holiday Resorts 140006437 100% 140006437 26000000 5.4
Yatra
Travel Guru 20000000 100% 20000000 43200000 0.5
Travel Services I 96977898 100% 96977898 1214520000 0.1
Snapdeal
Freecharge 400000000 100% 400000000 20000000 20.0
GoJavas 1200000000 20% 6000000000 2000000000 3.0
Flipkart Myntra 20000000000 100% 20000000000 4416000000 4.5
Table 1
d) Expected market growth: The growth rate for the overall e-commerce sector has been around 34% (5)
since 2009. Individual sector growth stand at 21% for e-retail (6); e-travel market growing at an average
rate of 17% (7). For others, the average growth rate can be taken as per the industrial segmentation. This
would after calculation sum up around 12%.
e) Effect of the deal on level of competition: It will be sector specific since the number of companies
coming up in every sector varies and competition is both direct as well as indirect.
f) Upcoming government policies: GST implementation and construction of the proposed railways and
roadways will help in improving the average rail transport speed to 75kmph from 25kmph currently (8).
The implementation of GST will reduce the overall tax expenditure thus improving upon the profit
margins (9). It is also expected that increased FDI will also improve the e-commerce situation in the
country.
g) Change in consumer behaviour: 95% of the consumers search online before making any purchase. 48%
of the consumers are influenced by Social media in their decision making. 41% of the consumers make
purchase after receiving a discount offer over e-mail and 25% make a purchase after receiving an offer
through sms. Thus, we can assume that with the increasing mobile phone and internet penetration, the
consumer has started valuing comfort at home more over anything else especially since it comes coupled
with good quality and less expensive prices. (7)

10. 10
6) e-RetailSectorAnalysis
Year 2012 2013 2014 Year 2012 2013 2014
Sales 205.01 1,180.07 2,846.13 Sales 100% 100% 100%
Expenses 153.7575 861.4511 2020.7523
Gross
Margin 25% 27% 29%
Gross Margin 51.2525 318.6189 825.3777
Operating
Margin -52% -23% -13%
Operating Expense 158.8025 594.2889 1207.7677 EBIT -54% -24% -14%
Operating Margin -107.55 -275.67 -382.39 PBT -54% -24% -14%
Depreciation 2.38 6.07 17.97 PAT -54% -24% -14%
EBIT -109.93 -281.74 -400.36
Interest Expense 0 0 0
PBT -109.93 -281.74 -400.36
Tax 0 0 0
PAT -109.93 -281.74 -400.36
Table 2 Flipkart- Data Analysis
Fig 3 Flipkart- Data Analysis
The operating margins have been increasing over the time. This can be attributed to the multiple vertical
integrations that Flipkart has undertaken. It can be observed that most of the platforms that Flipkart has acquired
have been 100% acquisitions with the acquired companies allowed to function as a separate division with the
same team but as a part of Flipkart only.
Examples of some such acquisitions for Flipkart include:
100%
25%
-52% -54% -54% -54%
100%
27%
-23% -24% -24% -24%
100%
29%
-13% -14% -14% -14%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
120%
Sales Gross
Margin
Operating
Margin
EBIT PBT PAT
Mar-12
Mar-13
Mar-14

11. 11
1. Flipkart-Mime360: A digital content platform which hosts music streaming. A 100% acquisition done
in part stock and part cash aimed at giving boost to the music segment on the website. Flipkart used the
Mime360 platform to advertise for its music services as well as gained from sales on Mime360.
2. Flipkart-We Read: A social book recommendation website with 3 million readers and 60 million
books. A 100% acquisition again, almost all the consumer base of the website was later directed to
Flipkart.
3. Flipkart-Adiquity: Adiquity provided a mobile advertisement network platform. With 25 billion
advertisement impression in 200 countries, Flipkart has used this platform not only to advertise for its
products on the mobile apps but also to sell its consumer purchase behaviour to sellers online.
4. Flipkart-Appitrate: Appitrate provided a mobile engagement and mobile app testing platform. A 100%
acquisition of the firm helped Flipkart in its app development and testing thus saving on the outsourcing
cost.
As, stated above; due to the lack of availability of the data for most of these firms that Flipkart has acquired, we
have assumed the valuation factor to be less than 1 as per the e-commerce industry trend. The one major deal
with Myntra which stood at a value of INR 2000 Crore had a valuation factor of 4.5 only which was very
conservative and an efficient bargain for Flipkart considering the growing sales of Myntra. (10)
Another important factor that needs to be looked into is the company getting overly optimistic in valuing the
firms they want to buy. The Snapdeal-Freecharge deal with a valuation factor of 20 is one such example. This
has resulted in Snapdeal registering losses which have increased five folds pegged at around 1500 Crore
according to a report submitted by Economic Times (11) With a firm spending around INR 1200 million on
discounts a month; paying 20 times the value of a firm was definitely a wrong decision. Another fact that might
have triggered this over valuation may be that with net sales of INR 2 Crore, Freecharge itself was valued at
about 2 times more. An acquisition however did give a sudden boost to Snapdeal’s valuation from INR 12460
Crore to INR 28000 Crore but the end result is evident in form of the accumulated losses.
The point to be noted here is that the model many of the e-retail companies have started to follow does work
well in the short run but there is a high possibility for it failing in the long run due to high debts which will
eventually lead to degrading investor confidence. (12)
The synergies expected in these cases are mainly operational and financial. The financial part is more of
expected since the consumer loyalty is very low in these segments; dwindling at 34% (13)

12. 12
Thus, such heavy investments when the acquirer is still running in loss are not advisable. It is instead better
that the already owned portfolio is made strong and the requisite investment be made in strengthening the
supply chain and offering new differentiation points to the consumer since variety, low price, quality and one
stop shop have already become the basic needs to be satisfied.
Also, with the pace of growth in this sector, new competitors are coming up by the day, in such a case
acquisitions, no matter how much they are will have no effect on the competition level. With the passage of
the FDI bill, the competition will only stiffen. Hence, achieving operational efficiency should be the major
target of the firms instead of spending heavily on acquisitions.
The other acquisitions made in the Industry include:
1. Myntra- Fitiquette: Myntra acquired San Francisco based Fitiquette. Fitiquette is a technology solution
which is a virtual fitting room. The acquisition was partly cash and partly stock. According to Myntra,
the acquisition will give it one more way to help remain competitive against the likes of Snapdeal and
Flipkart.
2. Myntra- Sher Singh: Online private label retailer Sher Singh was acquired by Myntra in cash and stock
deal. Both had common investors and according to these firms, the deal will leverage already existing
synergies between the brands. Sher Singh will help Myntra in getting private label while Sher Singh
will be able to target broader audience. Co-founder of Sher Singh was appointed as lead of private label
initiative of Myntra. With mergers Myntra has been able to bring key people on board.
3. Snapdeal- Yebhi: Snapdeal acquired Yebhi for an undisclosed sum. However we expect the valuation
to be higher than the average of 4.8 since Yebhi was the market leader in its segment of footwear retail.
4. Snapdeal-Unicommerce: Snapdeal merged with Unicommerce which is an e-commerce management
software and fulfillment solution provider. The acquisition of Unicommerce was expected to help
Snapdeal manage everything from vendors to inventory and from warehouse to shipment and returns
5. Snapdeal- Martmobi: Snapdeal also acquired mobile technology startup MartMobi. This acquisition
was aimed to help the firm strengthen its mobility platform for merchant partners. For Snapdeal, 75% of
orders came from mobile-based devices and similar trend was witnessed on merchant side too. Hence,
The Martmobi team was a great addition as it will help strengthen the platform for sellers
6. Flipkart- V hive
7. Flipkart- Letsbuy
8. Flipkart- Chakpak
9. Zovi- Inkfruit

13. 13
7) e-Travel Sector Analysis
a) Thomas Cook-Sterling Resorts
The total Deal was valued at approximately INR 8.70 Billion (USD 145 Million), involving a cash
consideration of up to INR 5.93 Billion (i.e. aggregate of INR 1.88 Billion under SSA, INR 1.76 Billion
under SPA and INR 2.3 Billion for Open Offer) (USD 98.83 Million) and a share swap for the remaining
amount under the Scheme. TCIL was funded by its immediate promoter, Fairbridge Capital, through the
subscription to Compulsorily Convertible Preference Shares (“CCPS”) worth INR 5 Billion (USD 83.33
Million). The remaining amount required was funded through internal accruals.
Further, funds of up to INR 7.2 Billion (USD 120 Million) were pushed down to TCISIL by subscription to
3, 60, 00,000 equity shares, each of face value INR 10/- of TCISIL by TCIL at INR 200/- per share (ie. at a
premium of INR 190/-). (14)
‘The Spectrum of Leisure Real Estate Products in India’ a report published by the Group RCI-Cushman and
Wakefield Hospitality Report17 in 2009 said that Vacation Ownership (or timeshare) was a nascent concept
in India then and it had a potential to grow at approximately 16% per annum from 2006 to 2015, which will
be facilitated by the supply growth of approximately 12% per annum over the same period. An article
published in 2012, noted that the Vacation Ownership / Timeshare sector witnessed a growth of 18% during
2008-2012 period. (15)
The healthy growth projections quoted in the above mentioned reports seems to have consistently met by the
companies operating in the Vacation Ownership sector. Further, the Vacation Ownership players have been
enthused by the present government’s renewed focus on building the tourism industry in India, and with
economic sentiment on the upswing, the industry is expecting a boost in the growth of vacation ownership
sales. (16)
Sterling has been generating positive cash flows, and it is expected that Sterling’s revenue for the year
ending March 2014 will be of approximately USD 26 Million, with a breakeven free cash flow. Thus, to that
extent, it can be expected that Thomas Cook will not be required to further fund Sterling’s operation and
management cost.
In addition to the developed property in form of existing resorts, Sterling also owns 150 acre of the
undeveloped land with huge development potential and TCIL’s acquisition price (approximately USD140
Million) is excluding the value of the unutilized land.

14. 14
Both the companies operate in the same sector with each of them having a large travel oriented customer
base. Further, industry experts believe that this could also be a move towards vertical integration. TCIL as a
travel services company can start offering the hospitality options to its customers as currently provided by
Sterling on standalone basis, thus helping them to plan their holidays better.
b) MakeMyTrip Deals
This was just one example where vertical integration was the major source behind the deal and hence the
valuation factor stood at 5.4. The MakeMyTrip-Ixigo deal in which the valuation factor stands at 6 is
another such deal. With Ixigo being a Meta search engine which provides leads to the airlines, MakeMyTrip
will be able to push the leads generated through its website by using Ixigo which will project the
MakeMyTrip deals on priority which could have otherwise gone unnoticed.
Thus, Ixigo would act as a marketing tool for MakeMyTrip.
Year 2012 2013 2014 Year 2012 2013 2014
Sales 889.81 1,115.32 1,340.17 Sales 100% 100% 100%
Expenses 533.886 713.8048 911.3156
Gross
Margin 40% 36% 32%
Gross Margin 355.924 401.5152 428.8544
Operating
Margin 2% -7% -5%
Operating Expense 336.964 480.0852 489.3744 EBIT 2% -8% -6%
Operating Margin 18.96 -78.57 -60.52 PBT 2% -8% -6%
Depreciation 4.28 9.12 19.24 PAT 2% -8% -6%
EBIT 14.68 -87.69 -79.76
Interest Expense 0 0 0
PBT 14.68 -87.69 -79.76
Tax 0 0 0
PAT 14.68 -87.69 -79.76
Table 3-MakeMyTrip- Data Analysis

15. 15
Fig 4-MakeMyTrip- Data Analysis
From the financial data available for MakeMyTrip, we can notice that the splurge of deals that took place,
did bring the overall profit margins of MakeMyTrip down but the vertical integration has started showing its
effect in the improved PAT in 2014 over 2013.
c) Yatra Online
Yatra Online had gone for four major acquisitions within a span of 3 years starting from 2011 (17), all the
acquisitions made were loss making companies and the valuations were done at less than 1. However due to
this, Yatra has considerably improved its customer base which might show its effect later. However, nothing
concrete can be sad about it due to lack of the financial data for both Yatra and the companies it has
acquired. (18)
Yatra Online bought Travelocity’s Travelguru in July 2012 to boost its hotel bookings portfolio in
the backdrop of poor margins in the ticketing business. For Yatra, Travelguru was its fourth acquisition in
the past 18 months. In January’12, the company acquired events and entertainment
portal Buzzintown.com to expand its customer base by adding over 3 million registered users of
Buzzintown.com. Previously, Yatra.com acquired ticket consolidator Travel Services International Pvt.
Ltd. In July 2011, Yatra.com acquired hotel Aggregation Company Magic Rooms offering access to a live
inventory of over 3,000 hotels across India. At a time when air capacity is under pressure with airlines being
in trouble, the domestic hotel space is a natural hedge and there is tremendous growth in that space," Dhruv
100%
40%
2% 2% 2% 2%
100%
36%
-7% -8% -8% -8%
100%
32%
-5% -6% -6% -6%
-20%
0%
20%
40%
60%
80%
100%
120%
Sales Gross Margin Operating
Margin
EBIT PBT PAT
Mar-12
Mar-13
Mar-14

16. 16
Shringi, CEO said Expedia India. Expedia India, the Indian arm of US-based online travel company
Expedia Inc, said it was also keen on evaluating opportunities for acquisitions. (19)
The competition in the segment is growing and the market growth is also good, hence we can conclude that
vertical integration in this segment is the right thing to do. Aggregating all the resources at one place helps
the consumers to have the complete travel solution at one place. Whichever company does this first is sure to
have the first mover’s advantage. The only point of concern remains the quality of services offered, which
the acquiring companies will have to take care of as a part of post merger integration.
Other deals that have happened in the travel segment include:
1. MakeMyTrip - Luxury Tours and Travels
2. MakeMyTrip - My Guest House Accommodations
3. MakeMyTrip – EasytoBook
8) Other e-Commerce Deals
a) Mahindra-BabyOye
Year 2012 2013 2014 Year 2012 2013 2014
Sales 110.56 196.31 205.7 Sales 100% 100% 100%
Expenses 96.46 141.34 114.15
Gross
Margin 13% 28% 45%
GrossMargin 14.1 54.97 91.55
Operating
Margin -58% -43% -40%
OperatingExpense 77.96 139.22 173.58 EBIT -69% -52% -49%
OperatingMargin -63.86 -84.25 -82.03 PBT -75% -58% -55%
Depreciation 12.58 17.19 17.97 PAT -72% -58% -54%
EBIT -76.44 -101.44 -100
InterestExpense 6.51 12.68 14
PBT -82.95 -114.12 -114
Tax (Extraordinary
Items) -3.26 -0.36 -1.96
PAT -79.69 -113.76 -112.04
Table 4-Mahindra Retail: Losses and yet and acquisition for diversification
The deal done in Feb 2015 was done to consolidate the BabyOye product line with the Mahindra owned
Mom & Me. At the time of acquisition, BabyOye was already running into losses to the tune of about

17. 17
INR 15.14 Crore. Due to this, the venture capitalists Tiger Global, Accel Partners and Helion Venture
Partners had already shown aversions to invest in it. At such a time, Mahindra Retail which was already
running losses could have readily waited for BabyOye to shut completely over time and hence have the
competition reduced instead of investing in it. The deal value is not yet undisclosed however, all the
payment was made in cash and at one go. How, this will turn up for Mahindra Retail is yet to be seen in
the way its financials turn up. (20)
Fig 5-Mahindra Retail: Losses and yet and acquisition for diversification
a) Yahoo-Bookpad Deal
Year 2012 2013 2014 Year 2012 2013 2014
Sales 237.91 243.31 219.3 Sales 100.0% 100.0% 100.0%
Expenses 183.88 203.49 185.77
Gross
Margin 22.7% 16.4% 15.3%
GrossMargin 54.03 39.82 33.53
Operating
Margin 22.7% 17.0% 15.3%
Operating
Expense 0 -1.48 0 EBIT 0.7% 2.2% 11.9%
Operating
Margin 54.03 41.3 33.53 PBT 0.7% 2.2% 11.9%
Depreciation 52.45 36.06 7.39 PAT 0.5% 1.5% 8.3%
EBIT 1.58 5.24 26.14
Interest
Expense 0 0 0
PBT 1.58 5.24 26.14
Tax 0.474 1.572 7.842
PAT 1.106 3.668 18.298
Table 5-Yahoo-Bookpad Deal
100%
13%
-58%
-69% -75% -72%
100%
28%
-43%
-52% -58% -58%
100%
45%
-40% -49% -55% -54%
-100%
-50%
0%
50%
100%
150%
Sales Gross Margin Operating
Margin
EBIT PBT PAT
Mar-12
Mar-13
Mar-14

18. 18
After Facebook and Google acquired Little Eye Labs and Impermium respectively, Yahoo has bought
Bangalore-based Bookpad, a startup that's barely a year old and founded by three youngsters who passed
out of IIT-Guwahati over the past three years. The precise value of the deal could not be ascertained, but
sources said it's a little under $15 million (Rs 90 crore). Bookpad's enterprise software product,
DocsPad, allows users to view any document (like PDF, Word, Powerpoint), as also edit and annotate it,
within a website or app. It works across devices, and does not require downloading of plug-ins or
desktop software. For Yahoo, a content provider, the technology can potentially be embedded in many
of its services. Currently, Bookpad supports 15 different document formats. The potential is huge
considering that 2.5 billion people browse the internet and 53 billion documents are on the cloud today
and the number is expected to touch 200 billion within the next two years. (21). As can be seen from the
financials, the deal is showing good results for Yahoo.
Fig 6-Yahoo-Bookpad Deal
100.0%
22.7% 22.7%
0.7% 0.7%
0.5%
100.0%
16.4%
17.0% 2.2% 2.2%
1.5%
100.0%
15.3%
15.3% 11.9%
11.9%
8.3%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
Sales Gross Margin Operating
Margin
EBIT PBT PAT
Mar-12
Mar-13
Mar-14

19. 19
9) Conclusion
a) Limitations
a. Most of the companies in e-commerce sector are relatively new and unlisted. Thus, availing the
data of the same was difficult. A more detailed analysis could have been done if the said data
were available
b. Many of the deals in question have taken place within a span of five years hence the deal values
have not been fully reflected in the financials.
b) Due diligence is very critical for e-commerce related deals as majority of the companies are running in
loss. Add to the fact that most of them are unlisted and hence getting accurate information becomes even
difficult. In such a case, former employees and existing customers will play a major role in
understanding the condition of the target company.
c) There are certain parameters which need to be stressed upon while ascertaining the effectiveness of
valuation. These according to our analysis include:
a. Financial of the buying company
b. Financial of the target company
c. Expected Synergies
d. Expected market growth rate
e. Effect of the deal on the level of competition
f. Effect of the Government policies which are upcoming or are in place
g. Change in Consumer Behaviour
d) E-commerce is a business which is running totally on expectations and increasing customer base.
However with the bundling losses, the sustainability of this business model is under question. There is a
possibility that after a time the companies in question will have to resort to the actual pricing model and
then they would lose the only advantage that they have over brick and mortar stores leading to an e-
Commerce bubble burst.

20. 20
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