Why India’s e-commerce start-ups are on investors’ radars
INDIA’S shoppers are shunning brick-and-mortar outlets for the convenience and security of the web.
A validation of the trend in the country that is set to overtake China as the world’s most populous nation came last week with Walmart-owned Flipkart India’s rival to Amazon raising 3.6 billion in new financing ahead of an expected initial public offering (IPO).
“We have started to see a select few players cornering most of the market share,” said Nikhil amath, co-founder of asset management company True Beacon and brokerage
erodha. “Naturally, competition has gotten intense.” Digital payments company Paytm, backed by SoftBank, is seeking regulatory approval to raise more than 2.2bn in what would be one of the country’s biggest stock market listings.
While the pandemic may dent the pace of economic expansion, online sales are growing in tandem with the increasing uptake in digitilisation of businesses amid the Coivd-19 pandemic.
E-commerce sales in Asia’s third-largest economy are projected to grow 18.2 per cent annually between 2021 and 202 to 8.8 trillion rupees ( 120bn), according to consulting firm GlobalData. E-commerce payments are forecast to grow 16.8 per cent this year to . tn rupees, compared to 12.2 per cent growth in 2020.
“The Covid-19 crisis has accelerated the digital payments shift in India and opened ecommerce to a whole new set of consumers and merchants who were not using online channels earlier,” said Ravi Sharma, the banking and payments lead analyst at GlobalData.
“Rising consumer preference for online shopping, proliferation of e-retailers and emergence of new payment methods will continue to drive e-commerce growth in India.” Major e-commerce retailers in India, such as Flipkart, Amazon and BigBasket, have seen a rise in orders every month since the outbreak of the pandemic, according to GlobalData. Online purchases of groceries, electronic goods and healthcare products have all registered strong growth, according to the consultancy.
The uptick in e-commerce has been fuelled by a rise of smartphone ownership and internet access, an increase in digital literacy and the Indian government’s digital push, Mr Sharma said.
Such a favourable environment is prompting companies in the digital space, particularly established e-commerce platforms, to go public and capitalise on investor interest that can help them expand.
Bangalore-based Flipkart is expected to go for a public listing this year as it aims for a 0bn valuation. The company’s latest fundraising round saw Japan’s SoftBank reinvesting in Flipkart after it sold off its 20 per cent stake to Walmart as part of a deal completed in 2018, when the US retailer took a majority stake in the Indian e-commerce startup.