AS billions of dollars flow into India’s booming online economy, some investors are beginning to fret that soaring valuations could hamper market listings and limit their options when it comes to turning paper profits into cash.

    India’s rising number of smartphone users, cheaper Internet costs and a vast middle class have turned it into one of the hottest markets for investors such as Singaporean wealth fund Temasek Holdings, venture capitalists Accel Partners and Japan’s SoftBank Corp.

    But several advisers and particularly later stage investors say they are concerned that optimistic estimates and already sky-high prices implied by privately sold stakes could make initial public offerings hard to pull off.

    “Public markets will have a completely different perception to the excitement in the private market,” said a banker with an Indian firm, which advises investors in the online sector.

    “Investors are now taking a pause and asking if these valuations will stand the scrutiny of stock markets.”

    Investors have pumped US$4.5 billion into the Indian Internet space in the 13 months to February, with online marketplaces Flipkart and Snapdeal getting almost 60 percent of the funding since 2007, according to Morgan Stanley.

    Analysts value Flipkart, India’s biggest e-commerce company, at around US$11 billion. That would amount to roughly three times estimates of their gross merchandise volume (GMV), or the value of goods they sell. Snapdeal CEO Kunal Bahl said his company is currently valued at slightly over US$5 billion and is expected to end the financial year with US$3 billion in GMVs.

    Three of the leading brick-and-mortar retailers in the country — Future Retail, Shoppers Stop and Pantaloons Fashion and Retail — only manage a combined valuation of less than US$1.5 billion, according to Reuters Data.(SD-Agencies)