India’s online retailers get boost from investors



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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COMPANY PROFILE
Name: Almnssa
Started: August 2020
Founder: Areej Selmi
Based: Gaza
Sectors: Internet, e-commerce
Investments: Grants/private funding

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Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
 
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COMPANY PROFILE

Name: Cofe

Year started: 2018

Based: UAE

Employees: 80-100

Amount raised: $13m

Investors: KISP ventures, Cedar Mundi, Towell Holding International, Takamul Capital, Dividend Gate Capital, Nizar AlNusif Sons Holding, Arab Investment Company and Al Imtiaz Investment Group 

Gender pay parity on track in the UAE

The UAE has a good record on gender pay parity, according to Mercer's Total Remuneration Study.

"In some of the lower levels of jobs women tend to be paid more than men, primarily because men are employed in blue collar jobs and women tend to be employed in white collar jobs which pay better," said Ted Raffoul, career products leader, Mena at Mercer. "I am yet to see a company in the UAE – particularly when you are looking at a blue chip multinationals or some of the bigger local companies – that actively discriminates when it comes to gender on pay."

Mr Raffoul said most gender issues are actually due to the cultural class, as the population is dominated by Asian and Arab cultures where men are generally expected to work and earn whereas women are meant to start a family.

"For that reason, we see a different gender gap. There are less women in senior roles because women tend to focus less on this but that’s not due to any companies having a policy penalising women for any reasons – it’s a cultural thing," he said.

As a result, Mr Raffoul said many companies in the UAE are coming up with benefit package programmes to help working mothers and the career development of women in general. 

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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COMPANY PROFILE
Name: ARDH Collective
Based: Dubai
Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Sector: Sustainability
Total funding: Self funded
Number of employees: 4