After a downturn in 2016, when both investments and revenues were hard to come by, the India internet story seems to be looking up in 2017. Private equity and venture capitalists are once again backing e-commerce ventures in India although they’re cherry-picking their investments. Already, close to $4 billion has been invested in the six months to June, compared with $1.6 billion in the corresponding period of 2016, data from Jefferies show. However, while earlier in the year the investments were spread across several players, Paytm and Oyo hogged about 70% of the total funding in the April-June quarter of 2017. Investors appear to be especially keen to support fin-tech players — the sector soaked up a chunk of the funds that flowed in. Almost a third of the money that moved in went into fin-tech while another third found its way into e-tailing. In 2016, fin-techs attracted less than 10% of the funds.
For instance, payments wallet Paytm picked up over $1 billion from SoftBank in May at a valuation of nearly $7 billion. Following the fund-raising, SoftBank joined Alibaba Group as a major shareholder and secured a seat on the Paytm board. Other players in the fin-tech space that found supporters include Freecharge, CreditMantri, CCavenues, Mswipe, Coverfox, True Balance, MoneyTap, Perfios and Paysense; the companies operate in segments such as lending, insurance and finance management solutions.
Other big-ticket investments include Oyo Rooms raising $250 million from Greenoaks Capital, Sequoia Capital, Lightspeed Venture Partners and SoftBank, and Swiggy raising $ 80 million from Norwest Venture Partners, Bessemer Venture, SAIF Partners, Accel Partners and Nasper. Ace2three.com in the gaming segment raised $ 74 million, and Ola and Goomo in online cab and travel took in $50 million each in the travel sector.
In the absence of a meaningful growth in revenues or a substantial reduction in expenses, e-commerce ventures have found it hard to make ends meet. While the industry had started seeing some consolidation in early 2016, the subsequent shortage of cash that followed demonetisation and the anxieties ahead of the roll-out of the goods and services tax have both hurt business badly.
As such, further consolidation is likely, say sector experts, pointing out that Flipkart is expected to acquire Snapdeal. Again, Bigbasket is understood to be selling out to Amazon, although there is no formal announcement yet. While the bigger players such as Amazon and FoodPanda are gaining market share, smaller players would find it increasingly hard to survive unless they’re backed by continuous funding. Players such as Grofers are tweaking their business models to drive up revenues.