E-commerce market in India seen hitting $200 bn by ’26
Smaller players including Reliance Communications and Tata Teleservices Ltd are being forced to attempt to restructure debt and sell assets. Loss-making Tata Teleservices is said to be preparing to shut a large part of its telecom business, according to a Business Standard report that cited people it didn’t identify.
“No Indian bank is ready to fund the telecom operators. No foreign bank wants to do it,” Anil Ambani, chairman of Reliance Communications, told shareholders on 26 September. “There’s no financing for growth. Period.” Anil Ambani is younger brother to Mukesh, and the two brothers’ businesses are independent although they share spectrum, telecom towers and fiber.
Reliance Communications faces a deadline to restart payments to lenders and is racing to sell its spectrum and real-estate assets to reduce debt. A planned merger with Aircel Ltd collapsed earlier this month, bogged down by delays and lawsuits.
Consolidation in the Indian mobile industry is set to accelerate, turning it largely into a three-player market benefiting top operators, CLSA analysts wrote in an 9 October note.
Birla admitted that the entry of a large player with “deep pockets” had unleashed a lot of upheaval and all of Idea’s business strategies would need to take this entrant into account.
So when is the scathing price war expected to end?
“It’s hard to say,” Birla said. “You are asking the right questions to the wrong person.”
India’s e-commerce market will grow at a 30% compound annual growth rate for gross merchandise value to be worth $200 billion by 2026, according to Morgan Stanley.
In a report titled India’s Digital Leap–the Multi Trillion Dollar Opportunity, Morgan Stanley said this growth in will help grow market penetration to 12% from 2% today.
“Our analysis of some global e-commerce companies highlights that two-thirds of the growth in their e-commerce sales happened due to new users coming online and shopping, while the balance was driven by existing online shoppers buying more frequently and/or driving up order values,” the report said.
India had 60 million online shoppers in 2016, which is 14% of the internet user base of the country. This will rise to over 50% by 2026, the report said.
“What we have seen through proprietary consumer surveys in the past is that it takes time for consumers to get comfortable with a channel,” Parag Gupta, executive director, Morgan Stanley, said in an interview.
Growth, though, will still be led by the so-called “horizontal” e-commerce players such as Amazon and Flipkart. “If I look at the way e-commerce has evolved globally, it is generally the horizontal e-commerce players who have dominated,” Gupta said. “I believe the situation should not be very different in India, because the categories that become large in e-commerce generally happen to be those that can be dominated by horizontals— electronics and fashion.”