New Delhi, Nov 2 (IANS) After foreign investors injected some mega millions into India’s e-retail companies in recent months, including the $627 million for SnapDeal by Japan’s Softbank, public listing of shares and consolidation are seen as next big developments for this booming industry, seen as a $100 billion market in five years.
This, industry experts said, is not only to realise value for these companies but also to raise the $500 million that’s seen as the immediate funding needed for infrastructure, logistics and warehousing, which could go up to a whopping $950 million to $1.9 trillion by 2017.
“Public listing will take place for these e-commerce companies shortly. It could happen even in the next three-four months,” said Saurabh Srivastava, director-operations with PricewaterhouseCoopers.
“The demand in the e-commerce space will remain on the higher side in India. There will be also some consolidation in the e-tailing space with some mergers and acquisitions on the cards,” Saurabh Srivastava, told IANS.
Signs of these are already visible.
Earlier this year in May two of India’s better-known e-retailing companies, Flipkart and Myntra, merged. The deal was estimated to be worth about $300 million. Flipkart also got $1 billion in funding, taking its valuation to a whopping $7 billion.
Soon after, the US-based Amazon said it was investing $2 billion in India’s e-commerce space. Once Softbank’s investments come in, SnapDeal would have raised some $1 billion this year, including $133.77 million in February from eBay.
“All this cash infusion will help e-commerce companies to build a good scale. This will help the market to mature to the next level. After that they’ll look at Initial public Offers (IPO),” said Ashvin Vellody, partner, management consulting with KPMG.
“Broadly, it is a nice way to raise capital using these options,” Vellody told IANS.
“The e-commerce trend is two-pronged. There is this increase in velocity toward gaining scale and the second is the mix of business models. I guess there will be two types of business models — generalists and specialists.”
The data on Internet penetration in India is there to back the scales of operation.
There are currently 243 million Internet users in the country and, as per various studies, the e-commerce industry is growing at 38 percent annually. Analysts expect the market size, now at $15 billion, to touch $100 billion in the next five years.
It may come as a surprise, but according to a report of the commerce ministry-promoted India Brand Equity Foundation (IBEF), India has around one million online retailers — small and large — which sell their products through various e-commerce portals.
These online retailers have started using mobile apps to increase their reach. Several e-commerce firms such as SnapDeal, Myntra, Flipkart and Jabong are launching their mobile apps. Some have set aside huge funds to acquire companies in mobile apps space.
The market is also set to expand fast since even some large traditional format retail companies, like Reliance Retail of India’s largest private company Reliance Industries and the Aditya Vikram Group’s chains, are planning to go online.
According to Japnit Singh, senior director, Spire Research and Consulting, Singapore and India, the Indian e-commerce industry is also all set to see a consolidation mode over the next five years.
“In the next five years there won’t be too many players in the field left who will have the financial capability to survive. We do expect a lot of mergers of small players into the big players,” Singh told IANS.
“Only two-three big players will survive.”