India’s online retailers get boost from investors

Amazon’s entry into India last year has had a major impact on the market, triggering deals and investments as competition grows fiercer.

India’s online retail sector is poised to surge in growth as investment pours in.

Several online firms in India have secured fresh funding in recent months. Flipkart, India’s biggest online retailer. bought the country’s largest online fashion portal, Myntra, in May for an estimated US$300 million. Flipkart announced in the same month that it had received $210m of funds from a group of investors led by DST Global, an investment company controlled by the Russian billionaire Yuri Milner, which has also backed Facebook, Twitter and Groupon.

Snapdeal, another major Indian online retail firm, a couple of months ago raised $100m from investors including the US investment firm BlackRock, just three months after announcing that it had raised more than $133m in equity.

Amazon’s entry into India last year has had a major impact on the market, triggering such deals and investments as competition grows fiercer, analysts say.

“The global leader is expected to vie for the top slot in India as well, which has triggered an increased urgency and competitiveness within the sector,” says research by Technopak, an Indian consultancy. “As a result, there has been a significant increase in the investments that are being injected as well as the speed of consolidation.”

This consolidation process in India’s online retail sector is expected to continue, according to the consultancy.

“Players sharing common investors will increasingly look at mergers, acquisitions, while niche and speciality players possessing unique positioning, assets or capabilities will attract acquisition by the bigger players.”

India’s e-commerce has attracted $1.6 billion across 140 deals since 2012, Technopak says. In the first five months of this year, the sector has attracted $637m of funding compared to $592m in all of 2013.

The online retail industry is expected to grow to $32bn by 2020, up from its current value of $2.3bn, according to Technopak.

Aditya Birla, a major Indian conglomerate, is planning to embark on a programme to study opportunities in the e-commerce sector, India's Economic Times reported recently.

Walmart at the beginning of this month launched a wholesale e-commerce platform in India offering products to registered clients of its cash-and-carry stores in Hyderabad and Lucknow.

In this month’s union budget India announced that foreign companies manufacturing products there would be allowed to sell their goods directly to customers through e-commerce websites.

Foreign online retailers such as Amazon are not allowed to sell their own products in India under overseas investment regulations, but Reuters last month reported that the government is considering lifting this restriction.

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