Home D2C Buzz Valuations beckons conventional Indian companies to foray into D2C

Valuations beckons conventional Indian companies to foray into D2C

By  
SHARE

India’s conventional consumer goods companies are increasingly exploring direct-to-consumer (D2C) approach as it is seen as a 100 billion U.S. dollar opportunity in Asia’s third largest economy, according to experts, Wednesday.

Tata Consumer’s Nutrikorner, ITC’s Store.in and Hindustan Unilever’s The U Shop are some of the few amongst 600 Indian companies that have forayed into D2C after success of Nykaa on the bourses.

Deliberating on Day 1 of the two-day India D2C Summit 2022, experts opined that the new age companies are now attracting higher valuation compared to conventional FMCG companies with 10 percent revenue shift seen towards D2C by 2025.

“D2C brands enjoyed a price-multiple of 15-48 times of their respective revenue while conventional FMCG companies like ITC, Bajaj Consumer, Britannia enjoyed a multiple of 3-7 times,” said Ankur Bisen, Senior Partner and Head, Retail & Consumer, Technopak Advisors.

D2C pie in the consumer market comprising food, non-food, home appliances and furnishing, electronics among others is seen rising to USD 22 billion in 2025 from USD 1.9 billion in 2021, Bisen said.

Consumer market industry size was estimated at USD 147.5 billion in 2021 and seen rising to 208 billion in 2025.

So far only 5 % of the 600 companies in the D2C segment have achieved the Rs. 100 crore revenue milestone while 20 % and 75 % have revenue between 20-90 crore and below Rs. 20 crore, respectively, which may see consolidation going forward.

The push towards D2C came in the past two years during the pandemic as more Indians were seen online than ever before.

“700 million Indians have access to the internet today, yet less than 100 million have shopped online yet,” said Atul Mehta, Chief Operating Officer, Shiprocket, aided by the ecosystem of payment solutions.

The bigger push for D2C is seen from cross-border commerce as India’s exports in the just concluded financial year touched a 400 billion U.S. dollars milestone and 650 billion U.S. dollars target set for the current financial year.

India is amongst the top 10 countries in cross border e-commerce and its share is seen rising to 20 % in 2022 from 15 % in the year 2016, said Pavan Ponnappa, Head of Categories, Acquisition & Marketing eBay India CBT.

US, UK, Germany, Australia and Japan are the biggest market for cross border transaction in the D2C segment with jewellery, watches, health, beauty, clothing, footwear and accessories accounting for a large component of the segment, he said.