With most e-retailers unable to scale up quickly enough to turn profitable, investors are holding back on investments, reports Anushree Bhattacharya in New Delhi. Data released by Tracxn Technologies shows fund flows have slowed sharply with just $3.7 billion coming in between January and November. That’s less than half the $7.5 billion invested in the comparable period of 2015.
The number of deals — across Series A, B and C — at 216 this year is also turning out to be fewer than the 275 reported in 2015. Among the e-tailers that have picked up money early in the year include Snapdeal, BigBasket, CarTrade and ShopClues, who mopped up over $100 million each. In August mobile messaging platform Hike Messenger raised $ 175 million from investors including Tencent Holdings and Foxconn Technologies Group. Existing investors Tiger Global, Bharti Enterprises and SoftBank Group had also participated in the Series D round of funding.
While Amazon Inc has committed it will spend $five billion to build the business in India, Flipkart is reportedly in the market to raise resources; the e-commerce major reported a loss of R2,306 crore in FY2016 on revenues of R1,952 crore. Recently one of its investors, Morgan Stanly Mutual Fund, marked down the value of its holdings in the e-retailer by 38%, valuing the firm at $5.54 billion.
The tighter funding environment has led to consolidation in some e-commerce verticals, especially hyperlocals. Peppertap, for instance shut its grocery delivery business while some other e-tailers were acquired. Among the top deals of 2016 are Myntra’s acquisition of Jabong for $70 million, FirstCry’ s buyout of Mahindra Retail’s BabyOye for $54 million and Titan’s acquisition of CaratLane for $53 million. As many as 11 merger and acquisition (M&A) deals have been struck year so far. Data from Tracxn Technologies shows , more than twice the number of M&A deals transacted in 2015.
Although the number of online shoppers in the country, currently estimated at 30-35 million, is rising, analysts observe that e-tailers are finding it hard to attract customers unless they offer hefty discounts.