Home Retail E-Commerce Players Treads on External Funding Route

    E-Commerce Players Treads on External Funding Route

    By  
    SHARE

    Top online retailers will benefit from a strong revival of investor interest in India’s fast-growing e- commerce business. The E Commerce players are raising money in a gradual manner, announcing successive rounds of funding , which helps them benefit from rising valuations. Indian e- commerce sites have significantly increased their spending on technology, marketing and supply chains—These advancements are result of the fresh fundings.

    Indian online retailers are seeing a spiral growth in their business. India’s online retail market will expand by more than 50 percent annually for the next three years, tripling to Rs. 500 billion (US$ 8 billion) by 2016, according to leading Indian research firm CRISIL. It is because people started buying products online and it is becoming a habit, as there is no need to stand in a queue, walk on corridor and get tired while driving. Browse over the Internet and get your product delivered at your doorstep with discounts and peace of mind through cash on delivery, try and buy, 100 days return policy, no question asked, etc. Internet retailers are doing this to be ahead of competition and able to execute this because of big money they receive from their investment partners. Here is the list of some of the online retailers who received funding.

    The segment is also attracting a lot of capital. According to a paper published by Technopak, a consultancy firm, titled ‘Apparel e-tailing in India’, the US$ 130-million apparel ‘e-retailing space’ in the country has attracted investments worth US$ 70 million, or 40 percent of the total funding Indian online retailers got in the past two years. Many have also registered a high month-on-month revenue growth of 70 percent over the last one year. The e-tail sector is expected to grow at 59 percent a year and will account for one in every two e-commerce transactions by 2016, said the report.  The online travel segment contributes 71 percent of the total consumer e-commerce transactions whereas online retail, or e-tail, is the fastest growing segment contributing 16 percent of the overall transactions as of 2012.

    Several e-commerce companies are struggling to carry on with their day-to-day activities in what is universally accepted to be a money-burning business. It is a well acknowledged fact that e-commerce is a capital-intensive business and profitability takes time because of infrastructure issues, logistics costs and early-stage competition and hence, money will not come easily to e-commerce companies.

    Though e-commerce may be gaining momentum in India, but an estimated 70–80 percent of e-commerce companies are in dire need of funds, said a KPMG and Internet and Mobile Association of India (IAMAI) report titled e-Commerce Rhetoric, Reality and Opportunity. The report puts the size of the e-commerce market in India this year at US$ 13 billion. According to industry insiders, last year was tough for the newly launched e-tailers since they failed to attract investors to fund their expansion plans. However, established players were able to gain 80 percent PE funding. According to experts, the year 2013 saw big funds going to mature e-commerce players with US$ 620 million (Rs. 3,870 crore) pumped into 34 deals, with just 8 deals seeing US$ 523 million (Rs. 3,264 crore) of funds. The fattest paychecks went to India’s largest e-commerce player Flipkart, followed by Snapdeal.

    Except for the top couple of e-commerce firms, most companies are surviving with 12–14 months of cash and therefore need to raise capital, according to Mukul Singhal, Vice President of SAIF Partners, which has invested in four e-commerce firms. According to him: “In the online travel segment, only a few companies will be able to raise funds while the rest will struggle. In 2006, around 15–20 online travel firms could raise funds but only 3–5 firms were able to raise the third round of funds and only two or three raised a fifth round. What distinguishes Flipkart, Snapdeal or Myntra from others is the ability to raise subsequent rounds of finance.”

    Tapping the Recent Development in India’s  e- commerce Scenario

    1. Snapdeal has raised $100 million (Rs 590 crore) from a group of five investors including Azim Premji’s family office, the latest in a flurry of dealmaking in India’s fast-growing online retail space.
    2. Flipkart has raised 2 rounds of successful fundings in the last year. In the third round they have announced that the company has raised US$ 210 million, most of it coming from DST global solutions from Russia.
    3. Myntra also received funding of US$ 5 million, US$ 14 million, and US$ 20 million funding from Accel Partners, Mirchandani from Mumbai Angels, Tiger Global, IDG Ventures and Indo-US Ventures. Recently Myntra was in news for its merger with Flipkart.
    4. Yebhi received funding from Nexus Venture Partners, Catamaran Fund, Fidelity and Qualcomm. The size of funding was US$ 2.5 million, US$ 9 million, and US$ 20 million.
    5. Zivame, a lingerie online site run also received funding from IDG Venture and Indo-US Venture Partners.
    6. FirstCry.com selling baby products online received funding of US$ 4 million and US$ 14 million from IDG Venture and SAIF Partners.
    7. In November 2013, Urban Ladder raised US$ 5 million in Series ‘A’ funding from SAIF Partners, and from existing investor Kalaari Capital. The company needed funding to expand footprint, products range and to build its technology platform.
    8. Online private label footwear retailer Famozi is in the process of raising its first round of PE investment led by Future Lifestyle Fashion, says Puneet Khanna, Founder & Director of Famozi.
    9. Russia’s ru-Net has also backed Indian online companies Bestylish and Freecultr.
    10. Intel Capital has invested in Healthkart, an online retailer for fitness and healthcare products.
    11. Even ShopClues is looking to raise US$ 30–50 million in PE investments and is in talks with PE players like Warburg Pincus, SoftBank, and Digital Sky Technologies for the same, and is expected to close the funding round by end of this year. They will be looking at this round as a growth funding one and the company also plans to go for an IPO by 2016.
    12. Bigtree Entertainment, the holding company of India’s leading entertainment ticketing company BookMyShow, recently announced an investment from SAIF Partners and its existing investors Accel Partners and Network18. The investors have invested Rs. 150 crore as part of this round.
    13. Online food ordering startup Foodpanda.in is aiming for a market share of 10-15 per cent of the food delivery market in India. Currently the food delivery market, which is at Rs 2,000 crore in India is expected to reach Rs 5,000-6,000 crore by 2017 for both online and offline mode.
    14. Online grocer BigBasket is in talks with private equity investors ICICI Venture and Zodius Capital.
    15. Mobile commerce firm Paytm will invest Rs 150 crore in 2014 as it expands operations and reach buoyed by the growth in smartphone penetration in India.
    16. Flipkart to sell tablets under its range of private label electronics DigiFlip.
    17. Intel Capital, the venture capital arm of world’s largest chip maker, has led a $16 million (Rs 94 crore) funding round in Bangalore-based big-data analytics startup Vizury.
    18. Mobile money firm MMPL, subsidiary of Tata Teleservices, recently launched online retail ecommerce website, www.shop.mrupee.in, in partnership with Infibeam.