E-venture startups must avoid valuation bubble: Ratan Tata

Tata Group chairman emeritus Ratan Tata has taken a dig at the huge valuations of e-commerce start-ups, despite his own investments in some e-commerce firms in recent times, but said these new entrepreneurs needed to be encouraged.

"It's true valuations are very high and valuations seem to be driving these companies more than the more traditional metrics of valuations," he said while speaking at an industry event at the Indian Merchants Chamber.

Tata said start-ups must ensure that Indian ecommerce was not headed for a valuation bubble.

"It is similar to what has happened elsewhere and we ought to give these young entrepreneurs a chance to prove themselves shoulder-to-shoulder with traditional business," he said.

Tata is of the view that startup e-commerce firms are asking for too high a price for parting stakes, and that "valuations" and not "evaluations" are driving these ventures. Tata, however, said the trend is not different from what is observed in other sectors.

"It's true that the valuations (of e-commerce) are very high and valuation seems to be driving these companies more than traditional matrix of evaluation," Tata said at the 107th annual general meeting of Indian Merchants' Chamber.

Tata himself, in his personal capacity, has invested in e-commerce start-ups, including Snapdeal, PayTM, Urban Ladder and Bluestone. He said he felt e-commerce really made sense and that it all depended on how and when a company or an entrepreneur makes decisions.

"It's actually a feeling that e-commerce is really the new trend for the Indian commerce. It serves millions of people. It's my personal money and not the company's money. I don't see where the debate is," he said.

"I believe that Indian enterprise needs to be encouraged. One needs to lend mentoring to young people, to give them a chance. One feels very proud when this new segment is emerging in the country," he added.

Tata also felt that overseas investments in e-commerce companies will make these start-ups stronger in terms of management and governance standards and ensure that they do not stray into unethical business practise.