Big-ticket investments continue to flow into the country’s e-commerce sector. With Japan’s telecom and media major SoftBank on Tuesday pumping a cumulative $840 million into Snapdeal and Olacabs, total investment in e-commerce firms crossed the $3-billion mark in the first 10 months of the year. This is nearly a five-fold jump from 2013.
SoftBank announced a funding of $627 million into e-tailer Snapdeal, apart from investing a further $210 million into Olacabs, an online market place for cabs and car rental services.
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The $627-million investment in Snapdeal, at an estimated valuation of nearly $3 billion, makes SoftBank the largest investor in the homegrown e-tailer. Existing investors also participated in this round, investing ‘a significant undisclosed amount ‘. SoftBank vice-chairman Nikesh Arora, who earlier donned the hat of chief business officer at Google, will join Snapdeal’s board. Though Snapdeal declined to provide an official statement, sources said SoftBank has picked up a 20-25% stake in the company.
Snapdeal had scored big twice earlier this year, when it raised $105 million from Temasek, BlackRock and Premji Invest, among others, in May and $133.7 million from a clutch of investors, led by eBay, in February. With the latest round, Snapdeal has notched up $860 million in 2014, second only to cross-country rival Flipkart, which lapped up $1.2 billion this year from Singapore’s sovereign wealth fund GIC and Russian investor Yuri Milner’s DST Global, among others. Global e-commerce major Amazon also announced a $2 billion investment to ramp up its India play.
Masayoshi Son, chairman & CEO of SoftBank, said: “We believe India is at a turning point in its development and have confidence it will grow strongly over the next decade. As part of this belief, we intend to deploy significant capital in India over the next few years to support development of the market”. Softbank is likely to invest $10 billion in India in the coming years.
“Our entire team at Snapdeal is thrilled and honoured to have SoftBank as a strategic partner. We are confident we will further strengthen our promise to consumers and create life-changing experiences for 1 million small businesses in India,” Snapdeal co-founder Kunal Bahl said in a statement on Tuesday.
The Indian e-commerce sector has attracted several foreign investors this year, despite all e-tailers incurring losses. Incidentally, Snapdeal reported a loss of R264.6 crore in FY14 while Flipkart reported a loss of R281.7 crore in FY13. “I think Snapdeal does not intend to fight it out for the top spot. Flipkart is the leader, followed by Amazon. Snapdeal will be looking to carve a niche for itself and still hold a significant place in the market,” said Ashish Jhalani, founder of eTailing India.
Niren Shah, managing director at Norwest Venture Partners, believes the rising investor interest in the sector stems from the fact that India is uniquely poised as a market which is both large-sized and also growing rapidly. “We believe that internet and e-commerce have come of age. Firstly, mobile internet is leapfrogging the land-line internet driven by smart-phone penetration and cheaper data rates. Secondly, Indian e-commerce still has relatively lower penetration among the Internet users and, hence, significant runway exists for exponential growth in Indian e-commerce. It is expected that e-commerce users in India will grow exponentially from the current 25-30 million to 250 million in the next five years,”said Shah.