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E-commerce
Thematic | E-commerce
INDEX: Fast and furious; Just the beginning of multi-year explosive growth
SUMMARY
STORY IN CHARTS
SECTION-1
SECTION-II
SECTION-III
SECTION-IV
SECTION-V
CLASSIFIEDS
3
7
E-commerce in India set to explode
Size of India's e-commerce market to reach USD20b by 2015
Growth drivers similar to those in China
China's Alibaba makes history
Sizing up Indian e-commerce market
Online Travel
E-tailing
Classifieds
Financial Services
All about share gains
Additional factors challenging profit generation
Competitive forces: Red ocean at large
The conundrum of business model
Why Snapdeals marketplace and strategy will likely work
Jabong Key player in the fashion e-tailing segment
Allied industries stand to benefit in equal measure
Online coupons / discount marketing
Digital advertising
Logistics, warehouses and payment gateways
Companies
Info Edge - Initiating coverage with a buy
Just Dial - Company Update
COMPANY PROFILES:
E-TAIL
Flipkart, Jabong, Snapdeal, Shopclues, Infibeam, Myntra, Fashion And
You, Zivame, Healthkart, Bigbasket, Bluestone, UrbanLadder
TRAVEL
MakeMyTrip, Yatra
CLASSIFIEDS
Bharat Matrimony, People Group, Zomato, Quikr
ALLIED/ECOSYSTEM Mydala, Pay Point India, DTDC, PAYU, Hungama
APPENDIX
EXPERT SPEAK
Mr Rajan Anandan, Head Google India
Mr Nitin Bawankule, Industry Director Google India
Mr Kunal Bahl Co-founder and CEO, Snapdeal
Mr Sanjiv Kathuria, Director & CEO, DotZot
Mr Nitin Gupta, Co-founder and CEO, PayU India
November 2014
19
30
39
46
59
69
73
88
90
94
100
6
27
40
54
57
Thematic || E-commerce
E-commerce
Thematic
E-commerce
Fast and furious
Just the beginning of multi-year explosive growth
Online shopping of physical goods alone in India is estimated to reach USD4b in 2014,
and multiply by over 11x to USD45b by 2020 that is CAGR of 50%.
Indian Retail is ~USD600b, of which only 0.3% was online sales in 2013. Even as a % of
Organized Retail, online sales are <4%.
In China, E-tailing grew at a CAGR of 76% over CY08-CY13 to USD306b, and is expected
to grow at a CAGR of 31% till 2017, to a staggering USD893b. The drivers
demography, internet user base, smartphones, physical retail limitations.
The wave of online shopping will also drive other industries like logistics,
warehousing, coupons and payment gateways. Among other winners, we see
following players with strong edge Snapdeal.com, Jabong.com, Mydala.com, DotZot.
Source: Mysay.in
Summarizing competition
We watch our competitors, learn from them. See the things that they were
doing for customers and copy those things as much as we can. Jeff Bezoz,
Founder and CEO, Amazon
You should learn from your competitor, but never copy. Copy and you die.
Jack Ma, Executive Chairman, Alibaba Group
Summarizing latency
November 2014
Some will call us a success and we are worth billions (because of this fundraise).
And, of course, there are some who will call it a bubble. We know that raising
money is not success. It is a responsibility that opens up new opportunities.
Jason Goldberg, Founder, Fab.com
In the future, instead of buying bananas, you could go pick them off a tree in a
virtual jungle. Yasuhiro Fukushima, Honorary Chairman, Square Enix
3
Thematic | E-commerce
10.0
Korea
US
6.0
0.3
India
China
Pricing discounts
~USD2b
commitment
Branding / Marketing
~USD300m
Technology platform
USD110m+
Logistics / Other
infrastructure
9.7
13.0
18.2
24.8
CY12
CY13
CY14E
CY15E
INVESTMENTS
Source: MOSL
295
US
China
13
India
Drivers of growth are similar to those in China, the biggest global e-tailing market:
Chinas e-commerce market today is estimated to be at par with or even slightly
ahead of the US. It reached its inflection point in 2005, when the size was similar to
Indias current e-tail market. Also, the key enablers for ~120% CAGR since 2003
were very similar to the Indian market: (1) increasing broadband penetration, (2)
acceptance of marketplaces, and (3) lack of offline retail infrastructure in many
regions. Cash-on-delivery (COD) has gained popularity as a mode of payment.
Travel dominates Indian market, but e-tailing will drive future growth
Online travel constituted ~71% of the e-commerce market in India, followed by etailing (16%). Travel has grown at a CAGR of 32% over 2009-13. However, going
forward, e-tailing will be the biggest growth driver, with expected CAGR of 60%+ to
USD7b in 2016 from USD1.7b in 2013. Within e-tailing, Fashion is likely to be the
driving segment. Fashion was USD559m in 2013, and estimates peg the growth in
Fashion e-tailing to anywhere between USD3b and USD6b by 2016.
November 2014
Thematic | E-commerce
Leading Indian players are not thinking of profitability just yet, and compeition is
causing all serious participants to have a ready warchest for the splurge which
will happen further, as the industry scales multiple times.
On an average, the e-commerce ecosystems in both China and the US make 810% EBITDA margins (Alibaba is an exception at 40%+). Amazon, the industry
pioneer, is yet to achieve healthy profitability, after two decades of dominance.
559
CY12
CY13
CY16E
Thematic | E-commerce
It took 110 years for the number of land-line consumers to reach 1b, 14 years
for 1b cellular users and 8 years for 1b internet users. The next disruption is
coming from smartphones. One needs to watch out for the future for devices
like Google Glass and Google Watch.
In 2014, there will be ~2.8b people on the internet, with ~1.75b smartphone
users. By 2020, this number will increase to 5b people, and there will be 40-50b
connected devices.
India had 213m internet users in 2013, and is currently adding ~5m every
month.
In the next one year, India will be the second largest population on the internet,
greater than the US, and only behind China. China today has 580m internet
users. By 2018, India should have 500m internet.
~50% of the mobile users use internet on their phones. This number will
increase to ~65% by 2015.
November 2014
Thematic | E-commerce
Story in charts
Exhibit 1: Digital commerce in India scaled to
USD11b in CY13
November 2014
Thematic | E-commerce
Story in charts
Exhibit 7: E-tailing is expected to be the fastest
growing segment
Exhibit 9: Intense competition has already driven multiple acquisitions in the segment
Date
2014 May
Target
Myntra.com
Acquirer
Flipkart
Description
Myntra.com gets acquired by poster boy of Indian e-commerce, Flipkart. The deal
values Myntra reportedly at Rs. 2,000 crores and is a 100% acquisition in cash and
stock. After the acquisition, Myntra will continue to operate as a seperate entity
with the CEO of Myntra heading the fashion business.
2013 June
Redbus.in
Ibibo
redBus.in acquired by Ibibo group backed by Naspers group reportedly for Rs. 800
crores.
2013 February
Inkfruit.com
Zovi
2012 February
Letsbuy.com
Flipkart
Letsbuy.com got acquired by Flipkart for cash and equity. The Letsbuy team of 350+
was expected to continue to function independently with access to Flipkarts
technology platform and supply chain capabilities.
Source: News Articles, MOSL
November 2014
Source: MOSL
Thematic | E-commerce
SECTION-I
Online
Retail=USD1
.98b
November 2014
Thematic | E-commerce
Demand in India exists across 4,000-5,000 towns and cities, and in ~95% of these,
there is no significant presence of offline retailers. As e-commerce evolves, it is
addressing a core need of connecting demand to supply.
Penetration of physical
retail, especially organized
retail is constrained by high
costs and low density
Offline retail has not been able to expand, as real estate cost as a percentage of
retail sales in India is as high as 14x that in the US. Real estate cost for large retailers
in India is ~7% of sales against 0.5% for companies like Wal-Mart in the US.
India does not have too many fashion or lifestyle brands that are bigger than
~USD200m in annual sales. There is huge fragmentation not only on the supply side,
but also on the distribution side. Beyond the top 10-15 cities, there is not enough
selection or distribution available through offline retailers for consumers.
Various sources peg growth in the industry in the years to come at extremely high
rates, given the multiple enabling factors and an extremely low base.
Exhibit 15: Market extremely small v/s other large
internet populations
November 2014
10
Thematic | E-commerce
E-tailing will be the fastest growing segment: As at the end of 2013, e-tailing
constituted only ~16% of the Indian e-commerce industry. However, as predicted by
Google India, this will be the biggest component of Indian e-commerce in a few
years. By 2020, e-tailing is projected to grow to USD45b, up from ~USD2b in 2013
and ~USD4b in 2014. This would then be the largest segment in the estimated
USD70b e-commerce industry by then.
Apparels is the largest etailing segment in China,
and the fastest growing in
India
Within e-tailing, fashion & apparel will grow fastest: 2013 saw a steep rise in the
fashion category, where e-commerce GMV doubled from USD278m to USD559m.
Fashion is likely to be a key driver of growth, going forward. It contributed 28% to
overall GMV of E-tailing, but is expected to contribute 35% to incremental market,
and grow to USD2.8b by CY16 (33% share v/s 28% in CY13).
Exhibit 17: Fashion is the fastest growing category in the Indian e-tailing market
Exhibit 18: From content to buying fashion the evolution of internet usage
Travel
Content
Electronics
Books
Fashion
Source: MOSL
Exhibit 19: Industry leaders now focusing on fashion & apparel
In April 2014, Amazon India started selling apparel on its India website, entering a fastgrowing and higher-margin category. This increased competition for Myntra and Jabong,
the top firms in the category.
Flipkart and rival, Snapdeal, had also been trying to build their apparel business. Flipkart
eventually bought out Myntra in May 2014, a month after Amazons entering the
apparel market.
November 2014
11
Thematic | E-commerce
Broadband population the fundamental driver: Underpinning the growth of ecommerce in China is the worlds largest online population. China had 129m
broadband accounts in 2011 and has over 600m internet users, dwarfing the 81m
accounts and ~280 internet users in the US. Other enablers like expanded 3G+
coverage and wider card usage are just gaining traction.
Filling a need gap: Chinas new consuming class increasingly has money to spend,
but in many regions, the offline (brick-and-mortar) retail industry is
underdeveloped. Etailing has produced super-charged growth because it is
successfully targeting and fulfilling this previously unmet consumer demand.
Marketplace-driven: Large B2C (business-to-consumer) sites are the clear leaders in
other countries, but not in China, where nearly 90% of the industry is marketplace
based. This compares with a marketplace share of just 23-24% in the US. With only
few major physical retailers developing a successful multi-channel approach,
marketplace operators have consolidated a huge market share. The largest online
marketplace operators Taobao, Tmall, and Paipai account for ~90% of the
November 2014
12
Thematic | E-commerce
Chinese etailing market. Taobao alone had more than six million registered sellers
by the latest count. Marketplace operators generate revenue through online
advertising and, in some cases, charging sellers transaction fees.
C2C (consumer-to-consumer) refers to ecommerce activities between individuals
and includes transactions between micro-businesses that do not have company
registration or between micro-businesses and individuals. Micro-businesses and
SMEs are the sellers in most C2C transactions in China. In most other countries, most
C2C sales are secondary market transactions between individuals.
Exhibit 21: Marketplace drives e-commerce in China
Mobility: Mobile commerce (purchasing via mobile phone) is not yet a significant
phenomenon in China. As of 2011, it accounted for only 1.9% of the e-tailing market
(USD2.2b). This increased to USD27b in 2013 and, in 2014, the share is estimated to
grow 10-fold to 19% (to USD51.6b). There is great potential for this segment to
continue after the take-off. The penetration of smartphones in China has gone up
from 24% in 2011 to 40% in 2013, and expected to grow to ~50% by 2018.
Exhibit 22: China's mobile commerce to grow rapidly with smartphone penetration
Source: www.techinasia.com
November 2014
Difference v/s US: Chinese and US consumers have different expectations about
how their purchases should be delivered. US consumers do not expect one or twoday delivery from all e-merchants (although that is a feature offered by some
leading names), but they almost always have the option to pay extra for faster
delivery, which is available across most of the nation. Chinese consumers in the
largest cities expect next-day delivery, but that level of service is not available in
13
Thematic | E-commerce
small cities. Cash-on-delivery (COD) has become a thing of the past in the US, but it
remains common among many independent B2C merchants in China.
Exhibit 23: Difference between Chinese and US e-commerce industries
Parameter
China
US
USD190-210b
USD220-230b
E-tailing as a % of Retail
5-6%
5%
Marketplace share
90%
23-24%
C2C share
70%+
<10%
Apparel
Travel
8-10%
8-10%
2%
5%
Smartphone penetration
10%
42%
Payment
COD
Cards
November 2014
Chinese e-commerce giant Alibaba sold ~USD25b in stock, making it the biggest
US initial public offering (IPO) ever, followed by Visa, ENEL SpA, and Facebook.
Alibaba accounts for ~80% of all online retail sales in China, where rising
internet usage and an expanding middle-class helped the company generate
gross merchandise volume (GMV) of USD296b in the 12 months ended June
2014.
For the fiscal year ended March 2014, Allibaba saw its revenue rise more than
50% to USD8.45b. Its profits, meanwhile, nearly tripled to USD3.75b.
14
Thematic | E-commerce
Mobile will be a chief contributor to that trend 70% of the growth in Indian
internet users is mobile-only. Mobile shopping grew 8x in CY13, and is expected to
grow at a CAGR of 150% over CY13-16. Having said that, mobile revenue share is still
lagging mobile traffic share in India. This is because of the following reasons:
This is set to change. There is increasing focus on mobile as the most important
channel, given the increasing traffic share from mobile devices.
November 2014
15
Thematic | E-commerce
Increase in internet
population will be
accompanied with surge in
online buyers
Source: IAMAI
November 2014
16
Thematic | E-commerce
Based on the above facts, demographics suggest a definite surge in growth as:
The age group of 18-35 will only keep spending higher as the years pass by,
increasing the per consumer spend on online shopping.
With apparel growing the fastest in the e-tailing segment, the gender skew of
shoppers towards male will also likely correct itself.
Concerns like doubts on online transactions would get attended to, as sellers
mature on one side and on the other, users experience the convenience by
transacting smaller values to start with, which should gradually grow.
According to a Forrester Research report, social networks play an important role
in driving consumers online and getting them to engage with brands. This would
gain specific significance in light of facts such as India being ranked as
Facebooks third largest audience after the US and Brazil.
228
121
5.5
0.03
0.05
2000
November 2014
38
No of users (m)
21
17.4
150
12.9
11
3
12.8
Till 2010
By 2015
2006
2011
2015
17
Thematic | E-commerce
November 2014
18
Thematic | E-commerce
SECTION-II
Digital commerce in India is a ~USD11b (INR630b) market, and online travel accounts
for 71% (INR449b) of this market.
Over CY09-13, the industry has grown at a CAGR of ~35%. E-tailing has led growth,
with a CAGR of ~59%, doubling its share from 8% to 16%.
Source: IAMAI,
CY09
149.53
15.50
15.40
7.75
4.31
42.96
192.49
CY10
204.4
23.72
18.48
10.85
5.18
58.23
262.63
CY11
265.72
38.42
22.55
16.82
7.92
85.71
351.42
CY12
345.44
64.54
28.86
23.54
11.10
128.04
473.49
CY13E
449.07
100.04
36.07
30.61
13.88
180.60
629.67
November 2014
19
Thematic | E-commerce
ONLINE TRAVEL
The entry of low cost carriers (LCCs) in the Indian aviation sector in 2005 marked the
beginning of the second wave of e-commerce in India. Their decision to sell tickets
online and through third parties enabled the development of online travel agents
(OTAs). They developed their own websites and partnered with OTAs to distribute
their tickets online. The Indian Railways had already implemented the e-ticket
booking initiative by the time LCCs started their online ticket booking schemes.
On an average, the online travel industry has grown 32% from INR149.5b in 2009 to
INR345b in 2012; it is likely to grow 30% in 2013 to INR449b. Currently, of the total
online travel market, domestic air tickets contribute 50% (INR173b), followed by
railway tickets, which contribute 39% (INR136b). Others such as international air
travel (INR19.26b), hotel bookings (INR7b), bus tickets (INR6.41b), tour packages &
travel insurance (INR3.03b) contribute the balance 10%.
Exhibit 35: Online travel Industry (INR b)
Exhibit 36: Domestic air tickets dominate the segment; increasing focus on hotel bookings
November 2014
20
Thematic | E-commerce
Exhibit 41: Growth in hotels & packages is driving more investments, causing losses
November 2014
21
Thematic | E-commerce
E-TAILING
E-tailing comprises of buying consumer items such as books, apparel & footwear,
jewelry, mobiles, cameras, computers (desktops/laptops/net books/tablets), home
& kitchen appliances, home furnishings, vouchers/coupons, flowers and toys, and
gifts online. The e-tailing category has grown from INR15.5b in 2009 to INR64.54b in
2012. This category is estimated to cross the INR100b mark in the year 2013.
At present, laptops/netbooks/tablets contribute the most, i.e., 24.5% (INR15.79b) to
the e-tailing segment, followed by apparel & footwear, which contribute 20.6%
(INR13.31b). Mobile phones, cameras, and mobile & camera accessories together
contribute another 33%. In all, these four categories form nearly 80% of the e-tailing
pie. Of the remaining 20%, consumer durables & kitchen appliances, books, and
home furnishings contribute another INR5b, INR2.9b, and INR2b, respectively.
Emerging categories, comprising products like deals/coupons, toys, gifts,
handicrafts, flowers, etc, contribute just about 3% of the e-tailing pie.
Exhibit 42: E-tailing is the fastest growing category in the Indian e-commerce market
Source: Company
November 2014
22
Thematic | E-commerce
CLASSIFIEDS
Classifieds, the earliest entrant in the e-commerce space in India, is undergoing a
shift in operational model from vertical to horizontal offering. Players now offer a
gamut of services ranging from buying/selling cars to finding domestic
help/babysitters. E-commerce is set to continue on its growth path on the back of
stabilization of the ecosystem and interest demonstrated by VC players, coupled
with support from the Government of India (GoI).
The classifieds market, estimated at INR23.54b in 2012, has seen significant growth.
The segment includes services like online jobs, which contribute a huge 60%, valued
at INR13.8b, online matrimony, which constitutes 22% (INR5.08b), and other B2C
classifieds (cars, real estate, etc), which contribute ~7% (INR1.66b). B2B classifieds
comprise 13% of the overall classifieds market. Classifieds as a category has seen
45% CAGR from 2009, and is likely to grow 30% in 2013 to reach INR30.6b.
Exhibit 45: Classifieds, one of the oldest segments to go online, growing slower
than other segments
%
INR b
58.6
13.8
21.6
5.1
7.1
1.7
12.7
3.0
Source: IAMAI, MOSL
23
Thematic | E-commerce
Real estate: This comprises online real estate classifieds (www.99acres.com) and a
real estate brokerage business (www.allcheckdeals.com) housed in subsidiary,
Allcheckdeals.com India Private Limited.
Exhibit 51: Listings on 99acres are growing at a rapid rate
November 2014
24
Thematic | E-commerce
November 2014
25
Thematic | E-commerce
11.8
9.1
7.2
6.0
2.2
1.4
4.5
FY10
FY11
FY13
FY12
FY14
62
120
171
207
262
FY10
FY11
FY12
FY13
FY14
Sales (INR m)
52.4
EBITDA (INR m)
42.5
40.5
38.4
23.5
27.2
24.7
30.8
27.8
25.7
23.5
859
1,309
FY09
FY10
2,621
1,839
FY11
4,613
3,628
FY12
FY13
FY14
1,422
8.8
1,008
76
308
FY09
FY10
672
454
FY11
FY12
FY13
FY14
1,719 1,641
136
97
79
359
260
329
295
504
685
1,206
FY10
FY11
FY12
FY13
FY14
November 2014
FY10
601
409
FY11
957
726
FY12
1,023
662
FY13
FY14
26
Thematic | E-commerce
November 2014
Google Indias play in the classifieds space: Search is constantly evolving and
Google makes about 500 changes every year to its search product alone. Google
Search is focused on helping users find the most relevant answers to their
queries, and is not direct competition in most of the existing classifieds market.
The classifieds market is broadly divided into four categories jobs, matrimony,
real estate, and local vendors information. The segment where Google provides
relevant information to a consumer or end user directly is the local information
space. Example: searching for a local restaurant in Mumbai. OLX, Quikr, and
JustDial not only provide local information, but also get into the transaction
mode Google is not a player in that. Googles role for now is providing paid
links and organic results in the form of information to the customer.
Co-existence of paid links with classifieds players like Info Edge, JustDial: These
models were followed by search engines and directory kind of services. When
Google launched Search, it was clear that it will only surface advertisements that
will be clearly demarcated as advertisements and also show organic results.
Even the ads Google surfaces have to be relevant to the search query, so that
users find the information useful. Google is very different from these services.
On the possibility of mobile being a threat to search: Google has been focused
on being a mobile-first company. Every product Google makes, it first makes for
mobile. Google is very pleased that users enjoy using Google Search even on
mobile phones. Search has evolved a lot and today Google offers services like
Google Now, which provides information to users even without search queries.
Mobile is an exciting space and Google continues to innovate rapidly to benefit
both users and advertisers. Google recently launched the deep linking feature
for mobile phones. If a user searches for Flipkart on his mobile, and the app is
installed, Google directs the user to the Flipkart app on the mobile and not to
the website.
Monetization: Even a deep linking feature is monetized. If a user is directly
taken to any app through a Google Search, it is counted as directing the user to
the client.
27
Thematic | E-commerce
FINANCIAL SERVICES
The financial services market, valued at INR28.86b in 2012, is likely to grow 25% in
2013 to INR36.07b. Online financial services include applying for insurance or paying
insurance premiums/renewals (29%; INR8.5b), payment of utility/mobile bills and
mobile bills (40%; INR11.5b), and trading in shares and other financial securities
(31%; INR8.9b).
Exhibit 64: The allied industry is growing in tandem with overall growth in
digital commerce
INR b
29.4
8.48
39.8
11.48
30.8
8.9
Online transactions for financial services like Shares & Securities Trading
November 2014
28
Thematic | E-commerce
%
INR b
71.6
7.95
22.5
2.5
5.9
0.65
Source: IAMAI, MOSL
November 2014
29
Thematic | E-commerce
SECTION-III
Competitive intensity is running high in the Indian e-commerce industry. In their quest
to gain market share, all the big players are investing aggressively.
Flipkarts acquisition of Myntra and Zovis acquisition of Inkfruit are just two examples
of recent acquisitions in the industry. Appointment of leaders for acquisitions at
Flipkart and Amazon (India) suggest there are more in the pipeline.
Also, most of the amount of money raised by Flipkart, lately Snapdeal, and that
committed by Amazon is yet to be invested, indicating that we may not be anywhere
near the end of round-the-clock discount seasons at online stores.
Applying the five competitive forces model to the industry, we find a red ocean at
large. Profitability could be a few years away.
November 2014
30
Thematic | E-commerce
venture firm, Canaan Partners, will now lead the charge at Flipkart to acquire
companies and invest in startups.
Amazon India has roped in Abhijeet Muzumdar, former vice-president at
Bessemer Venture Partners, to lead its corporate development function.
Snapdeal chose Abhishek Kumar, head of investments at venture firm, Palaash
Ventures, for a similar role.
Target
Acquirer
Description
Myntra.com gets acquired by poster boy of Indian e-commerce, Flipkart. The deal
values Myntra reportedly at INR20b and is a 100% acquisition in cash and stock. After
the acquisition, Myntra will continue to operate as a separate entity, with the CEO of
Myntra heading the fashion business.
2014 May
Myntra.com
Flipkart
2013 June
Redbus.in
Ibibo
redBus.in acquired by Ibibo group backed by Naspers group reportedly for INR8b.
2013 February
Inkfruit.com
Zovi
2012 February
Letsbuy.com
Flipkart
Letsbuy.com got acquired by Flipkart for cash and equity. The Letsbuy team of 350+
was expected to continue to function independently with access to Flipkarts
technology platform and supply chain capabilities.
Source: News articles, MOSL
Flipkart, which created a trend among e-commerce players for exclusive online
launches, has unveiled over half a dozen brands, including Asus, Alcatel,
BlackBerry, Motorola, and Xiaomi through its portal.
Amazon launched sales of a Samsung phone and Swipe's Slice tablets,
exclusively. Besides, companies such as Snapdeal, Jabong and Pepperfry are also
ramping up exclusive online launches.
The trend has picked up, and players are now looking to extend these web
launches to other categories, such as sunglasses, watches, books, apparel, and
other non-electronic categories.
Motorola has sold over one million Moto G units through Flipkart. Motorolas
ranking in India went up from zero to fourth in just four months of its launch on
Flipkart.
31
Thematic | E-commerce
Employers are currently targeting FMCG and Telecom companies. Between them,
the 10 top e-commerce firms plan to hire 60,000 people for the year ending March
2015, the highest in a year for the fledgling industry. The job creation data is for the
entire ecosystem: ancillary units, supply chain and logistics, and temporary
employees. The main factors revving up the numbers is geographical expansion and
competition.
November 2014
Flipkart will double headcount to 26,000 this fiscal. Of these, 1,200 will be
engineers.
Amazon too is expanding and pays two-year joining bonuses of over INR4m at
the top levels.
Myntra plans to double its headcount this fiscal from a team of 500 employees.
Snapdeal intends to double headcount to 2,600 from 1,300 currently, and
increase the number of engineers from 250 to 500.
Zomato, the online food and restaurant listings startup, intends to double its
numbers from 650 in core functions such as technology, sales, content, and
operations because of its expansion in various countries.
Yatra, the online ticket booking site will add 200 to its employee strength of
1,000, against 150 last year. This excludes the addition of third-party workers.
Jabong will hire 750 employees this fiscal. Although the number is similar to last
year, full-time hiring will be 150 compared with 300 in FY14, while the rest will
be in the supply chain.
Ola cabs will hire 300 employees this year and 10,000-15,000 drivers, compared
with 150 permanent employees and 5,000 drivers last year.
TaxiforSure will expand to 15 locations by 2015, and as a result, overall
headcount will rise from 435 to 1,500.
32
Thematic | E-commerce
Burn is currently at multiple levels that drive loss at the gross margin levels:
Discount to attract consumer
Free Shipping
Cost of Delivery
Warehousing
Inventory and Write-offs
Manpower
Packaging
While some of these are here to stay despite the effect of increasing scale, pressure
on profits from others should come down gradually. Discounts are the primary burn
that one would expect to reduce once the market consolidates or growth begins to
November 2014
33
Thematic | E-commerce
taper. Other costs per shipment that will reduce with scale include warehousing,
shipping and packaging.
Fierce competition: The industry largely remains in investment phase, and the
greatest hurdle is fierce competition, spurred by the glut of investments over the
last few years. There could be as many five well-funded players battling it out for
the same small niche. For example, the market for baby products in the United
States is owned by diapers.com. Three different Indian companies are fighting it out:
Firstcry, Hushbabies, and Babyoye that had raised a combined USD30m as of 2012.
The companies have been fighting a price war that has pushed margins to almost
nothing on the most basic orders, like those for diapers and soap.
Limited brand recognition: The problem of competition is compounded by very
little brand recognition, barring select leading names. This implies heavy cost of
customer acquisition. As a result, even sales of high margin goods struggle to cover
the cost of referred customer acquisitions through discounts or ad words
marketing has been a huge bleed for e-commerce companies.
Too much money too early: What also is of little help to entrepreneurs is
unreasonable investor pressure. Too much money too early in the game is going to
make investors go after metrics that will not be profitable in the long run. This is
driving practices like focusing on the number of new account sign ups rather than
the number of customers who become habitual customers.
Profit history of large e-commerce case studies outside has been mixed. Globally,
Amazon, the world's largest online retailer, founded in 1994, has never been
profitable since inception. In contrast, China's Alibaba, the world's largest online
marketplace, has had a far smoother road to profitability, given that it does not own
any of the products sold on its flagship websites, Taobao and Tmall.
Exhibit 72: Despite two decades of leadership, Amazon is just about profitable
November 2014
34
Thematic | E-commerce
November 2014
35
Thematic | E-commerce
Exhibit 73: Shipping costs are a drain on profitability, a silver bullet for customer
experience
November 2014
36
Thematic | E-commerce
E-commerce companies are trying to outperform their rivals to grab greater share.
With the market space getting crowded, prospects for profit are low.
Products are becoming commodities, and cutthroat competition is turning the market
into a red ocean.
Threat of new
entrants
HIGH
Bargaining
power of buyers
HIGH
Rivalry among
existing firms
HIGH
Bargaining
power of
suppliers
LOW
Threat of
substitutes
HIGH
Source: MOSL
HIGH
November 2014
Typically, barriers to entry in any industry are capital, knowledge, or skill. Some
models in e-commerce, like inventory-led, are highly capital intensive which act
as greater entry barriers. Marketplaces offer few barriers to entry, as do the
skill-sets, which are acquirable.
Additionally, technology can be a barrier for new entrants, for instance, where
competing businesses have heavily invested. Their investment would act as an
entry barrier for new players. However, advancements in technology have given
rise to new ideas, providing opportunities for new entrants without the need to
build similar IT infrastructure.
While a vast network of suppliers is difficult to replicate for a new entrant, there
remains room for category-focused players, with strong backing of funds, to
compete aggressively in the market. As a result, in most models for ecommerce, the threat of new entrants is high.
37
Thematic | E-commerce
HIGH
It is easy to sell on the internet, so, at the moment; E-commerce is acting as a threat
to other channels of selling. However, products sold on one platform can be sold by
others firms that are inside or outside the industry. For example, if the buyer is not
sure about the product quality that will be delivered through an online order, he can
buy from a competing offline seller. Given the multitude of options available, there
looms a threat from substitution for the industry.
Rivalry
among existing
firms:
HIGH
The industry is growing, and the products on sale are not very differentiated.
Some firms try to differentiate themselves by adding value through additional
information for customers in case of category-specific portals; others are
striving to differentiate by investing in better overall shopping experience for
the customers. Some others are devising ways to encourage customers to spend
more time at their site.
However, above all these, the competitive intensity is being manifested in fierce
price war, driving higher losses. This is clear substantiation of strong rivalry
among existing firms.
HIGH
Bargaining
power of
suppliers
LOW
November 2014
There are no existing policies that govern FDI in e-commerce; they are clubbed
under the general rules for FDI in retail. As per extant FDI policy, FDI up to 100%
is permitted in B2B e-commerce activities under the automatic route. The
regulation has driven the choice of marketplace model by multiple companies
like Amazon and Flipkart.
The rise of e-commerce has posed new questions for taxation policies and
administration. E-commerce blurs the distinction between the sale of goods, the
provision of services, and licensing of intangible assets. Each of these is subject
to some form of taxation. According to media reports, tax authorities in
Bangalore, are looking into why Amazon India does not pay VAT on goods stored
in its warehouses. (More details appear in APPENDIX III).
38
Thematic | E-commerce
SECTION-IV
The juggle between marketplace and inventory-led business models has been
going on for a long time now.
E-commerce in India is gradually shifting to the marketplace-led model from
the inventory-led business model.
We like Snapdeal. It is focusing on providing the best marketplace and
attracting the maximum number of merchants.
The fashion segment provides room for category-focused players. Jabongs
combination with four other global entities is a unique development with rich
potential.
All these four distinctions are not applicable on a marketplace model. Multiple
models are in place today. We discuss below the merits of each.
Inventory-led model
For a market like India, where customers have low faith in shopping online,
customer satisfaction is of prime importance. The inventory-led model ensures
quicker deliveries, coherent quality checks, and better customer experience. That is
how Amazon operates in the US, and with regulators permitting, it would want to
replicate in India. This is a capital-intensive model, but with greater barriers to entry.
The inventory led e-commerce models have almost the same economic
characteristics as the traditional brick-and-mortar model when it comes to inventory
risk exposure, warehousing, and sourcing. It is highly unlikely to achieve good
profitability with no notable instances to substantiate. For a 30% gross margin
business, the inventory-led model involves spends of 45-50% on operating
expenses.
November 2014
39
Thematic | E-commerce
November 2014
40
Thematic | E-commerce
Exhibit 74:
November 2014
41
Thematic | E-commerce
November 2014
Online fashion selling requires initiatives and forays unique to the industry, than
merely connecting buyers with sellers. Some instances focusing on the different
aspects that need to be tinkered with in selling fashion:
Jabong launched the monthly fashion magazine, Juice, targeted at young Indian
e-shoppers looking for a guide that fulfills their aspirations, making fashion
accessible, affordable and attainable. Juice also has access to 800 of
Jabong.coms brands, including Vero Moda, ONLY, Jack & Jones, Steve Madden,
Dorothy Perkins, GAS, Rohit Bal, Wendell Rodricks, and more. Juice is a part of
Jabong.coms expansion plans and foray into fashion content publishing. This
fashion and lifestyle magazine is complimentary for Jabongs customers.
Myntra.com launched a Look Good Helpline, allowing customers to talk to a
stylist for personalized advice either by phone or email. It has become a hit
among young shoppers and peers like Jabong have also rolled out similar
services. Jabong.com, Like Myntra, has added stylists on call to help consumers
and plans to offer live chats with its advisors in the coming weeks. Both Jabong
and Myntra have lined up more than 20 stylists each to help consumers. Many
42
Thematic | E-commerce
people hired have worked with top models. Others are professionals who have
worked as magazine stylists.
Jabong has stayed at the forefront of leveraging high-end technology to create
incredible customer experience. It is one of the first e-commerce companies to
launch product videos. Customers are able to see models walking on the ramp
LIVE with the chosen product. This creates an in-store like experience on the
website.
Jabong launched the Jabong Online Fashion Week in 2014. Bridging the gap
between aspiring artists and the dynamic fashion industry, it invited applications
from brilliant fashion designers from across India.
Given these specific needs, the segment requires focused attention and innovative
strategies that are unique to fashion sales alone, and hence, it is not surprising that
focused segment players like Jabong and Myntra score over others.
Mr Praveen Sinha
Founder and MD, Jabong
November 2014
43
Thematic | E-commerce
Access to global talent pool: GFG becomes an attractive proposition for the best
talent in the industry, offering the prospect to ply their trade on a truly global
platform.
Access to funds: Investors behind the creation of this group have bet big and
invested hundreds of million dollars across the five companies. The entity is
already multi-billion dollar in terms of valuation (going by the valuation implied
in last funding rounds of individual companies), and will attract the biggest
funds, should there arise a need for capital in the future.
Sharing of a strong base platform: The combination will accelerate
development of technology platforms, with a common core more advanced
than peers.
Cross learning: The move will enhance capabilities and improve competencies
through cross learning across businesses, while reaping the benefits from
economies of scale.
November 2014
Tier-2 and tier-3 cities are underserved by traditional retail. E-tailers are poised
to tap the pent-up demand in these cities. Internet on the mobile is increasingly
acting as a channel for driving greater demand from these regions v/s tier-I
cities, which is already the case today.
Jabong launched native apps across all smartphone platforms, Android, iOS,
Windows Phone, and tablets. It is the fashion e-tailer to build a native
experience for the windows phone. Its Android app garnered 20,000 downloads
in the first three hours of launch. The app now is close to 5m downloads. The
iOS app saw a similar uptake, when the app was featured in the App store,
becoming one of the only e-commerce apps to be featured by iOS.
44
Thematic | E-commerce
Building
the trust
factor
Prevalence of
black money
However, with order values increasing, the trend is being corroborated by an uptick
in EMI as a mode of payment. A relatively new concept in India, third-party wallet
offers a strong value proposition and could quickly become popular.
November 2014
45
Thematic | E-commerce
SECTION-V
Online coupons /
discount marketing
Digital advertising
/ content
Travel Logistics,
warehouses
and payment gateways
November 2014
46
Thematic | E-commerce
The business
Online group buying refers to a group of people who want to buy the same
product or service and come together through a group buying website to
achieve certain discounts. Independent third-party group buying websites act as
the middlemen between companies and customers.
Deals sites make money either through a fixed commission for every sale or by
getting a percentage cut from the merchants. Physical establishments such as
spas, hotels and restaurants are also turning to deals websites to reach a wide
customer base without any upfront payment for advertisement.
In the US, Groupons gross billings in 2013 were USD2.85b, and considering its
market share, it pegs the size of the industry slightly below USD6b. Groupon
enjoys a valuation of USD4.5b+, and there exist another five companies with
over a billion dollar in market cap. In addition to these, there are another 7-8
large players that are not listed.
November 2014
47
Thematic | E-commerce
~7% of the total retail sales in India are impacted by coupons, pegging the goods
impacted by coupons at USD42b. Besides, discounted offerings on services such
as cabs, salon / wellness, hotels and restaurants constitute ~15% of the
industrys sales, pegging that at another USD11b+. The overall retail and
consumer services industry targeted by coupons stands at ~USD53b.
Typically, sellers spend 7-15% towards the cost of marketing discounts /
promotions. If we peg the same at ~10%, the effective addressable market for
discount marketing platforms today is ~USD5.5b.
November 2014
Globally, the major driver for the scale in the industry segment is the value
proposition for the small and medium businesses (SMBs), for whom RoI of
marketing efforts is paramount to the choice of channel.
Indias growing internet population is increasingly going online to scout for
discounts for almost everything from baby diapers and television sets to body
massages and five star hotel stays. E-coupons are gaining traction as they can be
easily targeted and are cheaper compared to distributing physical coupons.
As the usage of smartphones increases rapidly, couponing as an activity should
gain much more traction.
In China, tier-3 and 4 cities account for 53.5% of total market share. Tier-2 cities
account for a further 22.67% of the national total market.
48
Thematic | E-commerce
The two problems facing localized SMBs today in their discount promotions are:
1. Reach: Lack of an effective medium, with the plausible options being pamphlets
or newspapers being circulated locally
2. Relatively lower RoI on the invested efforts
Online discount marketing sites are an effective answer to both the problems:
1. If powered through mobile, the use of information specific to individuals can
help target the right individual for the message, solving the problem of reach
2. Also, by sharing a small commission of the sale made through the online
platform, the costs of such marketing are truly variabilized, ensuring higher RoI
Published numbers
Mr Arjun Basu
Founder, Mydala
November 2014
Mydala is the largest platform for SMEs and brands to market their discounts
and promotions in India. It has partnered with over 120,000 merchants across
200+ cities. Offers reach 35m unique users monthly through the internet,
mobile devices, and TV.
It provides small businesses and national/international brands with a
comprehensive hyper local marketing platform, allowing them to reach their
target audience through attractive deals, innovative branding, visibility, and
promotional campaigns.
It has tie-ups with major telecom service providers like Vodafone, Idea, and Tata
DOCOMO by offering couponing and loyalty services on their network. These
coupons are based on the user's dynamic usage pattern, location, mobile
credit/bill, and buying preferences.
Thematic | E-commerce
Source: daxueconsulting.com
November 2014
50
Thematic | E-commerce
Digital advertising
Increasing penetration of the internet is driving digital advertising in India. India is
the fourth largest audience of searchers in the world and the online advertising
market in India was estimated at INR2b in FY14. Digital advertising is growing at a
CAGR of 31%, making it the fastest growing segment in Indian media.
2011
2012
2013
2014
2015
139
154
172
193
215
241
11.5
TV
116
130
148
170
197
230
14.7
Out-of-home
18
20
22
24
26
29
10.0
Digital
15
20
26
34
44
57
29.9
12
13
16
20
24
30
20.7
Radio
Source: Indian Online Advertising revenues Forecast 2014, emarketer, Magna Global
November 2014
51
Thematic | E-commerce
With growth of the Indian mobile market, the mobile internet advertising segment
has also seen significant augmentation. Owing to an increase in the number of
feature phone and smartphone users, there is an upsurge in mobile internet usage
by consumers, especially from tier-II and III towns. Mobile devices being a primary
digital access point for several consumers, marketers have a range of opportunities,
particularly when it comes to reaching traditionally difficult-to-reach consumers.
Exhibit 82: Mobile internet users in India
85 million
URBAN
25
million
RURAL
Source: IAMAI
November 2014
Text Messaging
45%
Social Networking
26%
Web Browsing
15%
Applications
13%
Source: Nielson Report 2013
52
Thematic | E-commerce
While e-tailing does not require the opening of physical stores to capture consumer
demand, it needs an effective website through which customers can access product
information and place orders. Once the order is placed, it passes through another
set of stakeholders who bring the ordered product to the customers doorstep.
Most e-tailers view themselves as supply chain and technology integrators who
manage a complex web of stakeholders.
Given the geographical complexity, suboptimal infrastructure and regulatory
variations across the country, logistics in India has always been challenging. It has
also been more of a B2B service; the B2C logistics ecosystem (requires customer
interaction, cash handling COD ~60% of all deliveries, and returns handling) is still
a new and underdeveloped capability for 3PLs.
Up to 90% of goods ordered online in India are moved by air, which pushes up
delivery costs by around half, according to several online retailers and logistics
companies. Road and rail transport networks remain woefully underdeveloped and
entangled in graft and bureaucracy.
November 2014
Flipkart created a separate brand for its logistics arm in April 2013 and has so far
used eKart only for in-house deliveries. In February 2014, it opened eKart
logistics services for other e-tail ventures too.
Amazon too is pumping up capacities at Amazon logistics. That is in addition to
existing partnerships with 3PLs like GATI, Blue Dart, and FedEx Corp. Amazon
also started a pilot project with India Post to test the system and use the
channel to collect COD payments as well. This could help it reach deep into
India's hinterland. India Post has over 150,000 post offices in India, of which
89% are in rural areas.
In 2012, Jabong helped design the process for JaVAS, a logistics solution similar
to Amazon fulfillment services so that other e-commerce players can outsource
their logistics to Jabong on a contract basis.
53
Thematic | E-commerce
India has ~21,000 pin codes and most 3PL players are able to reach 8,000-10,000 pin
codes at best. India Post, with its formidable network across urban and rural India,
and its already established mechanism to handle money orders, can harness this
opportunity in a big way.
As per research by TechnoPak, case studies of the US Postal Service (US) and
Deutsche Post (Germany) demonstrate that these organizations have attempted to
remain relevant in the changing times by tapping into and benefiting from the
growth of e-tailing in their respective countries. Both the organizations are
significant in delivering parcels to e-tailing customers.
Exhibit 84: Share of revenues from e-commerce is significant
Exhibit 85:
Launched in mid-2013, DotZoT is the first pan India delivery network, focused
exclusively on the e-commerce/e-retail space. It is backed by DTDC's size, scale
and reach, and covers 8,000 plus pin codes and 2,300 cities across India.
DotZot aims to bridge the gap faced in logistics infrastructure by providing
superior logistics solutions to e-tailers, who are increasingly looking to enhance
customer shopping experience. DotZot ensures constant visibility of shipments
and real-time flow of information. It offers superior value and reliability to eretailers.
Massive opportunity
There is no e-tail without delivery. Delivery at the doorstep is a pre-requisite.
Logistics requirement for e-commerce will grow as exponentially as e-commerce.
Sizing the market today: The current market size of e-tail in India is estimated at
USD3b. If the average shipment value is of INR2,000, that puts the number of
shipments per year at 90m. E-tailers cater to ~50% of the shipment deliveries on
their own. 90m annual e-commerce-driven shipments as explained above imply
0.3m deliveries per day only for e-commerce parcels even today. That implies
~0.15m daily shipments of 4.5m annual shipments through 3PLs (assuming 50% is
catered to by the platform owners themselves). This pegs the overall cost of
November 2014
54
Thematic | E-commerce
55
Thematic | E-commerce
The costs incurred in setting up of shipment network are significant. Also, many of
such networks that exist in the smaller cities may end up becoming cost centers,
where deliveries of products happen from higher tier cities, and the reverse traffic is
virtually non-existent. However, that is not a significant concern for DotZot, given
DTDCs already established network that it can ride on.
56
Thematic | E-commerce
The entire payments market is much higher than the e-commerce market and
pegged at USD30b today.
Total revenue opportunity from USD30b of payment market is ~1%, which
translates to ~USD300m.
The payment market is growing in early double digits (10-15% YoY). E-commerce
is growing very fast, but the other segments are not.
While there are more people on the internet, a limited percentage transact
online.
November 2014
57
Thematic | E-commerce
Companies
E-tailing | Classifieds | Travel | Allied & Ecosystem
E-tailing
Classified
Travel
Allied &
Ecosystem
Digital
Content
November 2014
58
Initiating Coverage
| Sector:
Technology
Thematic
| E-commerce
Info Edge
S&P CNX
8,3244
BSE Sensex
27,860
CMP: INR854
TP: INR1100
Buy
Stock Info
Bloomberg
INFO IN
113.8
976 / 377
-6/28/88
M.Cap. (INR b)
97.2
M.Cap. (USD b)
1.6
1.8
2.5
3.1
EPS (INR)
15.0
20.9
25.7
27.1
39.6
23.1
BV/Sh. (INR)
138.6
154.7 173.8
RoE (%)
14.8
14.2
15.6
RoCE (%)
14.8
13.3
15.5
P/E (x)
57.1
40.9
33.2
EV/EBITDA (x)
47.9
36.0
27.1
EV/Sales (x)
15.6
12.8
10.3
Jun-14 Sep-13
44.5
52.2
14.4
11.4
31.3
30.8
9.9
5.6
775
625
475
Oct-14
Jul-14
Apr-14
Jan-14
Oct-13
325
November 2014
Using network effect to its advantage: With all enablers falling in place, the ecommerce industry is set to witness exponential growth over the next decade.
INFOE has had an early lead in the classifieds business, which is dominated by
recruitment, real estate, and matrimony. In addition, it continues to invest in
other assets, some of which are leaders in their domain notably Zomato.com
and Mydala.com. Management understanding of internet businesses is not only
driving INFOEs in-house businesses, but also helping identify and invest in
potential winning models at very early stages in their life cycle.
925
Early entrant into Indian online industry: Info Edge (INFOE) is in the business of
creating and developing domain-specific communities and information
exchanges on the World Wide Web. It owns and manages Indias premier job
portal (Naukri.com), third-largest matrimonial portal (Jeevansathi.com), leading
real estate portal (99acres.com), education portal (Shiksha.com), and related
services. Further, to tap into the growing Indian internet market, INFOE invests
in early-stage companies / start-up ventures. As at the end of 1QFY15, INFOE
had invested in six such ventures for a total payout of INR3.5b.
59
Thematic | E-commerce
Story in charts
Exhibit 87: Recruitment segment dominated the standalone Exhibit 88: and is the only profit making business in the
business
group
Exhibit 89: Recruitment business is closely linked to GDP Exhibit 90: but leadership position to sustain on network
growth
effect
Recruitment revenue growth (%)
8.6
24.1
6.7
25.4
8.9
6.7
7.8
11.3
4.7
4.5
9.8
FY14
FY13
FY12
FY11
FY10
FY09
-7.7
Amt. Invested
(INR m)
1441
718
325
270
571
54
45
285
26
holding
%
50
56
23
47
32
27
1399
-461.5
13
47
31
Source: Company, MOSL
November 2014
60
Thematic | E-commerce
INFOE is one of the largest internet companies in India. It owns and manages
Naukri.com (Indias number-1 job site), Jeevansathi.com (Indias third-largest
matrimonial portal), 99acres.com (Indias number-1 real estate portal), and
Shiksha.com (Indias only established education portal).
It raised INR1.7b through an IPO in November 2006 and a further INR7.5b
through a QIP in September 2014. With its headquarters in Noida (NCR), the
company employs 3,681 people and operates through 58 offices in 42 cities in
India. ~73% of its total employees (2,680 people) are in sales/client facing roles.
INFOE is in the business of creating and developing domain-specific
communities and information exchanges on the World Wide Web. It is Indias
leading online classifieds company in recruitment, matrimony, real estate,
education and related services.
Further, to tap into the growing Indian internet market, INFOE undertakes
investments in early stage companies / start-up ventures. As at the end of
1QFY15, INFOE had invested in six such ventures for a total payout of INR3.5b.
November 2014
61
Thematic | E-commerce
Businesses
From an industry perspective, INFOEs offerings can be classified into four broad
verticals in different stages of their life cycle:
Recruitment: The recruitment portal is a relatively mature business and the
primary source of revenue and profits. It comprises online recruitment
classifieds Naukri.com (Indias leading job site), and Naukrigulf.com (a job site
focused at the Middle East job market), and offline executive search,
Quadranglesearch.com.
Matrimony: This includes the matrimony portal www.jeevansaathi.com and 14
offline Jeevansaathi Match Points.
Real Estate: This comprises of online real estate classifieds www.99acres.com,
and a real estate brokerage business hived off as a separate subsidiary named
Allcheckdeals.com India Private Limited.
Education: This comprises of online education classifieds www.shiksha.com, a
marketplace that connects education seekers to providers.
Exhibit 93: Recruitments services are matured and major revenue driver for the company
November 2014
62
Thematic | E-commerce
Exhibit 94: As of 30 March 2014, INFOE has made the following strategic investments
Investee Company
Active
Zomato Media Pvt. Ltd.
Applect Learning Systems Pvt Ltd.
Etechaces Marketing and Consukting Pvt Ltd.
Kinobeo Software Pvt. Ltd.
Canvera Digital Technologies Pvt Ltd.
Happily Unmarried Marketing Pvt Ltd.
Sub Total
Written off/ exited
Studyplaces, Inc.
Ninety Nine Labels Pvt Ltd.
Nogle Technologies Pvt Ltd.
Subtotal
Total
November 2014
Website
Total Amount
invested (INR m)
Zomato.com
Meritnation.com
Policybazaar.com
Mydala.com
Canvera.com
Happilyunmarried.com
1441
718
325
270
571
54
3379
50.0%
56.0%
23.0%
47.0%
32.0%
27.0%
Studyplaces.com
99labels.com
Floost.com
45
285
26
356
3735
13.0%
47.0%
31.0%
% of Total
38.6%
19.2%
8.7%
7.2%
15.3%
1.4%
90%
1.2%
7.6%
0.7%
10%
100%
Source: MOSL, Company
63
Thematic | E-commerce
64
Thematic | E-commerce
prudent businesses when it comes to allocating capital, with a strong focus on RoI
and profitability. However, we are encouraged by the companys readiness to match
the spending prowess of its peers, to try and ward off competition and stay ahead in
the game. Its recent QIP to raise the funds highlights the very fact providing it with
a war chest, if needed, in the future.
November 2014
65
Thematic | E-commerce
Methodology
Methodology
description
Valuation
(INR b)
Contribution
(INR per share)
Naukri
68.4
570
99acres.com
24.6
205
Zomato.com
15.6
130
Meritnation
Assumed at USD500m Talks are on of Zomato raising next round of funding, valuing
the company anywhere between USD500 million to USD1
billion
Valuation ascribed in Meritnation raised INR100m from INFOE, which increased
the latest round of
the company's stake in FY13 from 54% to 55.81%
funding
This implies valuation of INR6b, of which 55.81% is ascribed
to INFOE
3.1
26
Mydala.com
3x forward sales
3.8
32
Jeevansathi.com
3x forward sales
1.6
14
Canvera
Valuation ascribed in
the latest round of
funding
1.0
12.9
107
1092
Cash On books
Total
Source: MOSL
November 2014
66
Thematic | E-commerce
November 2014
Income Statement
Y/E March
Sales
Change (%)
Employee benefit expense
Advertising and promotion cost
Other expense
EBITDA
% of Net Sales
Depreciation
Interest
Other Income
PBT
Tax
Rate (%)
Reported PAT
Extraordinary Items
Adjusted PAT
Change (%)
2012
3,771
28.3
1,370
516
442
1,442
38.3
77
20
395
1,740
511
29.3
1,230
0
1,230
46.4
2013
4,372
16.0
1,672
577
626
1,498
34.3
94
25
465
1,844
528
28.7
1,315
-293
1,022
-16.9
2014
5,059
15.7
1,968
662
761
1,668
33.0
174
51
432
1,876
591
31.5
1,285
0
1,285
25.7
2015E
6,080
20.2
2,436
778
883
1,982
32.6
189
14
797
2,575
781
30.3
1,794
0
1,794
39.6
(INR Million)
2016E
2017E
7,262
8,717
19.4
20.0
2,779
3,149
890
1,068
1,021
1,184
2,573
3,317
35.4
38.1
227
266
0
0
1,244
1,367
3,591
4,419
1,087
1,337
30.3
30.3
2,504
3,081
0
0
2,504
3,081
39.6
23.1
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Loans
Capital Employed
Gross Block
Less : Depreciation
Net Block
CWIP
Investments
Curr. Assets
Current Investments
Debtors
Cash & Bank Balance
Loans & Advances
Other Current Assets
Current Liab. & Prov
Current Liabilities
Provisions
Net Current Assets
Application of Funds
2012
546
5,198
5,744
2.8
5,747
908
376
531
94
3,666
3,183
0
36
2,985
62
99
1,728
1,496
231
1,456
5,747
2013
1,092
5,563
6,654
4.8
6,659
1,378
471
908
98
3,233
4,267
1,293
45
2,710
103
117
1,847
1,606
241
2,420
6,659
2014
1,092
6,530
7,622
4.4
7,626
1,501
645
857
95
3,775
5,088
2,531
50
2,311
69
127
2,189
1,865
324
2,899
7,626
2015E
1,199
15,424
16,623
4.7
16,628
1,731
834
897
98
3,882
14,139
10,173
71
3,542
201
153
2,388
2,283
105
11,751
16,628
(INR Million)
2016E
2017E
1,199
1,199
17,352
19,642
18,551
20,841
4.7
4.7
18,556
20,846
2,051
2,391
1,061
1,327
990
1,064
98
98
3,882
3,882
16,441
19,203
10,173
10,173
85
102
5,790
8,487
242
290
151
151
2,855
3,402
2,750
3,297
105
105
13,586
15,801
18,556
20,846
67
Thematic | E-commerce
2013
2014
2015E
2016E
2017E
11.3
12.0
52.6
1.0
10.4
12.0
12.9
60.9
1.0
9.7
11.8
13.4
69.8
2.5
23.4
15.0
16.5
138.6
3.0
24.1
20.9
22.8
154.7
4.0
23.0
25.7
27.9
173.8
5.5
25.7
72.6
63.9
52.3
17.2
12.2
0.0
57.1
51.6
47.9
15.6
6.2
0.0
40.9
37.5
36.0
12.8
5.5
0.0
33.2
30.6
27.1
10.3
4.9
0.0
23.7
26.3
21.2
22.6
18.0
20.9
14.8
14.8
14.2
13.3
15.6
15.5
3
6.0
4
4.3
4
5.3
4
6.1
4
6.7
4
7.5
2012
2013
2014
2015E
(INR Million)
2016E
2017E
CF from Operations
874
964
1,108
1,178
1,486
1,980
385
39
261
230
413
482
1,259
1,003
1,368
1,408
1,899
2,462
Net Operating CF
Net Purchase of FA
-1,103
-2,012
-1,024
-231
-320
-340
517
988
-7,228
1,244
1,367
-586
-1,024
-1,015
-7,459
924
1,027
-18
-36
7,513
-1
-48
-127
-255
-480
-576
-791
-49
-143
-291
7,033
-576
-791
624
-163
62
981
2,248
2,698
2,038
2,663
2,499
2,561
3,543
5,790
624
-163
62
981
2,248
2,698
2,663
2,499
2,561
3,543
5,790
8,488
November 2014
2012
68
Update
| Sector:
Technology
Thematic
| E-commerce
Just Dial
S&P CNX
8,324
BSE Sensex
27,860
CMP: INR1,469
TP: INR1,800
Buy
JUST IN
70.2
1,895/954
-11/16/-7
M.Cap. (INR b)
102.7
M.Cap. (USD b)
1.7
Adj PAT
EPS (INR)
19.3
27.7
36.0
Gr. (%)
12.4
43.3
30.0
BV/Sh (INR)
90.9
111.6 138.4
RoE (%)
23.1
27.4
28.8
RoCE (%)
32.6
38.5
40.6
P/E (x)
77.6
54.2
41.6
P/BV (x)
16.5
13.4
10.8
Shareholding pattern (% )
As on
Promoter
DII
FII
Others
Sep-14
Jun-14 Sep-13
33.0
33.0
33.1
4.6
4.8
6.4
26.6
35.8
25.5
36.6
21.9
38.7
Base business on strong growth trajectory: Just Dial (JUST) has a strong firstmover advantage among consumers seeking information on local businesses. It
has a strong database of 14.5m listings and SME database of more than 2,000
cities as on 2QFY15, significantly ahead of competitors. In terms of number of
listings, the second largest player, Askme, is 1/3 the size of JUST. We believe
JUSTs base business will continue to grow aggressively at 38% CAGR over the next
two years, driven by revival in the economic environment, leading to SMEs
increasing their ad spend. Margins in the base business will continue to expand, as
the share of voice search declines to single digits. In FY16, we expect voice
searches to account for ~5% of overall searches, while the share of internet would
be 15% and the share of mobile would be 60%.
Making inroads to international markets: JUST has entered countries like UK,
UAE, Singapore, etc, which are virgin markets, with limited competition.
International business will not be capital intensive, as it would only have internet
and mobile as segments (voice, which is an expensive proposition, would be
absent). Further, JUST has spent less than USD0.5m towards content acquisition
for these markets, which is minimal, given huge scalability of the model. We
believe JUST is making the right inroads in building a scalable international
presence, full benefits of which will be visible in 3-5 years.
69
Thematic | E-commerce
Story in charts
Exhibit 98: Total number of business listings
17.8
15.5
2.0
11.8
6.0
4.5
FY10
FY11
FY12
FY13
FY14
FY15E
FY16E
62
120
171
207
262
324
396
FY10
FY11
FY12
FY13
FY14
FY15E
FY16E
21.0
6.8
-11.1
20,276
20,885
FY12
FY13
FY14
FY10
FY11
FY12
FY13
FY14
FY15E
FY16E
Mobile
Voice
SMS
195.4
115.9
139.1
153.0
172.9
13.6
41.9
87.0
165.3
314.1
350.0
Mobile
Voice
SMS
80
60
71.5
93.9
4.7
9.6
27.9
57.1
77.2
124.3
182.6
224.0
280.0
2009
2010
2011
2012
2013
2014
2015E 2016E
2.0
3.0
-21.1
FY11
52.1
3.0
19,686
2.4
19,219
17,999
20,246
25,668
262
207
171
Growth%
Premium listings %
23.0
16.0
120
2.2
1.4
9.1
7.2
40
20
0
November 2014
2009
2010
2011
2012
2013
70
Thematic | E-commerce
(INR Million)
2012
2,621
42.5
672
25.7
2013
3,628
38.4
1,008
27.8
2014
4,613
27.2
1,422
30.8
2015E
6,061
31.4
1,699
28.0
2016E
7,667
26.5
2,534
33.1
2017E
9,529
24.3
3,303
34.7
Depreciation
EBIT
Interest
Other Income
Extraordinary items
90
582
0
132
0
144
864
0
135
15
173
1,249
0
400
0
189
1,510
0
400
0
237
2,297
0
440
0
295
3,008
0
550
0
PBT
Tax
Tax Rate (%)
Reported PAT
Adjusted PAT
Change (%)
713
209
29.3
504
504
70.7
984
297
30.2
687
702
39.2
1,649
443
26.8
1,206
1,206
71.8
1,910
554
29.0
1,356
1,356
12.4
2,737
794
29.0
1,943
1,943
43.3
3,558
1,032
29.0
2,526
2,526
30.0
2012
531
542
1,072
0
-9
1,063
600
251
348
12
1,568
540
0
0
237
303
1,405
1,392
13
-865
1,063
2013
695
3,564
4,259
0
9
4,269
967
359
608
16
4,858
593
0
9
239
345
1,806
1,787
18
-1,213
4,269
2014
702
4,643
5,345
0
18
5,363
1,060
532
528
0
6,257
865
0
0
370
495
2,287
2,103
184
-1,422
5,363
2015E
702
5,674
6,375
0
18
6,393
1,460
721
739
0
6,257
1,711
0
7
1,110
594
2,314
2,283
31
-603
6,393
2016E
2017E
702
702
7,128
9,004
7,830
9,705
0
0
18
18
7,848
9,724
1,860
2,260
959
1,253
902
1,007
0
0
6,257
6,257
3,157
5,366
0
0
9
12
2,435
4,499
713
856
2,468
2,907
2,428
2,855
40
52
690
2,460
7,848
9,724
E: MOSL Estimates
Balance sheet
Y/E March
Share Capital
Reserves
Net Worth
Debt
Deferred Tax
Total Capital Employed
Gross Fixed Assets
Less: Acc Depreciation
Net Fixed Assets
Capital WIP
Investments
Current Assets
Inventory
Debtors
Cash & Bank
Loans & Adv, Others
Curr Liabs & Provns
Curr. Liabilities
Provisions
Net Current Assets
Total Assets
November 2014
(INR Million)
71
Thematic | E-commerce
2012
2013
2014
2015E
2016E
2017E
9.5
11.2
16.5
0.0
0.0
10.1
12.2
61.3
0.0
0.0
17.2
19.7
76.2
2.6
13.5
19.3
22.0
90.9
5.3
24.0
27.7
31.1
111.6
7.9
25.1
36.0
40.2
138.4
10.6
25.8
157.9
133.9
90.9
40.1
156.2
0.0
148.5
123.2
24.5
28.9
104.1
0.0
87.2
76.3
19.7
22.7
73.7
0.2
77.6
68.1
16.5
17.2
61.3
0.4
54.2
48.3
13.4
13.4
40.6
0.5
41.6
37.3
10.8
10.6
30.5
0.7
49.8
70.4
26.3
37.5
25.1
34.3
23.1
32.6
27.4
38.5
28.8
40.6
4.4
2.4
193.9
-153.5
3.8
0.8
179.8
-146.1
4.4
0.9
166.4
-141.8
4.2
0.9
137.5
-103.1
4.1
1.0
115.6
-83.1
4.2
1.0
109.4
-78.1
0.0
0.0
0.0
0.0
0.0
0.0
2012
713
90
0
-209
444
-82
957
-231
-1,091
112
-1,209
293
-166
0
0
127
-125
196
71
2013
984
144
0
-307
314
-112
1,023
-361
-3,188
14
-3,535
2,513
1
0
0
2,514
2
237
239
2014
1,649
173
0
-443
340
0
1,719
-78
-1,399
0
-1,477
0
0
0
-163
-112
131
239
370
2015E
1,910
189
0
-554
-80
0
1,466
-400
0
0
-400
0
0
0
-325
-325
740
370
1,110
November 2014
(INR Million)
2016E
2017E
2,737
3,558
237
295
0
0
-794
-1,032
33
294
0
0
2,214
3,115
-400
-400
0
0
0
0
-400
-400
0
0
0
0
0
0
-488
-651
-488
-651
1,325
2,064
1,110
2,435
2,435
4,499
E: MOSL Estimates
72
Thematic | E-commerce
E-tail
Flipkart
FLIPKART
About the company
Business description
GMV data
Business scale
Investors
Funding history
Business outlook /
development
Flipkart went live in 2007 with the objective of making books easily available to anyone who
had Internet access. It is headquartered in Bangalore.
The company was founded by Mr Sachin Bansal and Mr Binny Bansal, who were colleagues at
IIT-Delhi and then at Amazon.com.
According to Alexa, Flipkart's website is one of the 10 most visited sites in India.
Legally, Flipkart is not an Indian company as it is registered in Singapore and majority of its
shareholders are foreigners.
Flipkart.com is Indias leading e-commerce marketplace, offering over 15m products cross
70+ categories, including Books, Media, Consumer Electronics and Lifestyle.
Flipkart has many firsts to its name in India: cash on delivery, 30-day replacement policy, EMI
options, free shipping.
As foreign companies are not allowed to do multi-brand e-retailing in India, Flipkart sells
goods in India through a company called WS Retail.
In March 2011, Flipkart had a run rate of USD10m. It announced plans to reach USD1b in
GMV by 2015.
Flipkart reached that milestone in February 2014 based on annualized monthly GMV.
This implied February 2014 GMV of USD83m+, (INR15b+ quarterly run rate).
Reliance Retail, India's largest retail store, had 3QFY14 revenue of INR40b.
Flipkart has a workforce of 14,000.
It has 22m registered users, clocking over 4m daily visits.
Revenue soared five-fold to more than INR11.8b in FY14, from INR2.05b in the previous year,
as per documents filed by the company with the Registrar of Companies.
Flipkart reported a loss of INR2.82b in FY13, much wider than the loss of INR1.1b in the
previous year, as it significantly raised spending to increase revenue.
Accel Partners
DST Global
GIC
ICONIQ Capital
Morgan Stanley Investment Management
Naspers
Sofina
Tiger Global
Dragoneer Investment group
Vulcan Capital
Raised USD1b in July 2014
Raised USD210m in May 2014
Raised USD200m in July 2013
Raised USD160m in October 2013
Raised USD150m in August 2012
Raised USD20m in June 2011
Raised USD10m in 2010
Raised USD1m from Accel Partners in 2009
Flipkart aims to be India's first USD100b company in the next five years.
It runs six warehouses and intends to open 50 more in the next three years.
It plans to nearly double its headcount to 26,000.
Source: Company, MOSL
November 2014
73
Thematic | E-commerce
November 2014
74
Thematic | E-commerce
Jabong
JABONG
About the company
Company's focus remains on retaining leadership with high priority on growth. Main focus is
on assortment, especially in the general merchandise category.
Business description
Business scale
Some numbers
Investors
Funding history
Business outlook /
development
November 2014
75
Thematic | E-commerce
November 2014
76
Thematic | E-commerce
Snapdeal
SNAPDEAL
About the company
Business description
GMV data
Business scale
Investors
Funding history
Acquisitions
In 3 round of funding of USD50m, eBay came as the largest investor in Snapdeal. The
investment also included a commercial partnership under which eBay got access to
Snapdeals 20m registered users, logistics software and distribution network.
Snapdeal is focused on adding as many merchants as possible and providing customers with
the best marketplace on its platform.
In December 2013, Snapdeal was converging towards USD0.5b in GMV.
As per the promoter, GMV grew 500% in FY14.
In May 2014, company expressed confidence in attaining USD1b in GMV.
In June 2014, Snapdeal stated that it has achieved the milestone of 1,000 sellers on its
platform and clocked sales of over INR10m.
The latest round of funding valued Snapdeal at ~USD1b.
Company currently ships products to over 4,000 towns and cities.
It has over 20m registered users.
Company has a wide array of 4m+ listed products encompassing 6,000+ brands and 500+
categories.
Snapdeal has 1,300+ employees, which it is looking at doubling in a years time.
Having launched the mobile app less than two years ago, it also generates over 50% orders
from mobile.
Over 60% of all units sold on Snapdeal are fashion goods. About 15 months ago, it was zero.
Nexus Venture Partners
Indo-US Venture Partners
Bessemer Venture Partners
eBay
Blackrock
Temasek Holdings
Premji Invest
Kalaari Capital
Intel Capital
Saama Capital
Raised USD12m in January 2011
Raised USD45m in July 2011
Raised USD50m in March 2013
Raised USD133m in February 2014
Raised USD100m in May 2014
Raised USD627m from Softbank in October 2014
In June 2010, acquired the Bangalore-based group buying site, Grabbon.com.
In April 2012, acquired esportsbuy.com, an online sports goods retailer based.
In May 2013, Snapdeal acquired Shopo.in, an online marketplace for Indian handicraft
products.
Source: Company, MOSL
November 2014
77
Thematic | E-commerce
Source: Company
November 2014
78
Thematic | E-commerce
Shopclues
SHOPCLUES
About the company
Business description
Business scale
Some numbers
Investors
Funding history
Business outlook /
development
The company is looking forward to handling 3m transactions and expects visitors on the
website to cross 100m.
ShopClues will launch its first-ever advertising campaign in September 2014 and has
earmarked INR750m for the same.
The aim is to have USD1b in GMV in 2016 and USD100m of net revenue, post which it will go
f
N d li i
Source: Company, MOSL
November 2014
79
Thematic | E-commerce
Infibeam
Infibeam
About the company
Business description
Business scale
Funding history
Business outlook /
development
Exhibit 119:
Exhibit 120:
November 2014
80
Thematic | E-commerce
Myntra
MYNTRA
About the company
Business description
Investors
Funding history
Business outlook /
development
November 2014
Myntra.com is an Indian online shopping retailer of fashion and casual lifestyle products,
headquartered in Bangalore.
It was established by Mr Mukesh Bansal in February 2007 with a vision of creating India's
largest on-demand personalization portal.
On May 22, 2014 Flipkart acquired Myntra in a deal estimated to be ~USD300m.
Myntra.com is an aggregator of many brands. Its business model is based on procuring
current season merchandise from various brands and making them available on the portal at
the same time as in respective retail brand outlets. All these products are offered to
customers on MRP.
Till FY14, Myntra had an inventory model. It disclosed its plans to roll out its marketplace
model from April 2014 (1QFY15).
From 2007 to December 2010, company was in the business of personalization of products
online. The products ranged from T-shirts, mugs, greeting cards, calendars, key chains, diaries
etc.
However, in 2010, it expanded the catalogue to retail fashion and lifestyle products.
In 2013, Myntra acquired San Francisco-based Fitiquette, a developer of virtual fitting room
technology.
Myntra's target for FY14 was to double its turnover from INR4b in FY13 to INR8b.
Myntra.com offers close to 70,000 products from more than 700 leading Indian, international
and designer brands. The portal receives over 50m hits every month and services over 9,000
pin codes across the country.
Myntra invested 8-10% of sales in brand promotion to develop the market.
Tiger Global
Kalaari
PremjiInvest
IDG Ventures
NEA-IndoUS Ventures
Accel Partners
Raised seed funding in October 2007 from Accel, Mumbai Angels and another angel investor
Raised a funding of USD5m in November 2008
Raised second round of USD14m in 2011
Raised USD20m in third round towards the end of 2011
Raised USD25m between 3Q and 4Q of 2012
Raised USD50m in February 2014
In its newly-launched marketplace, Myntra expects to have ~500 vendors signed up within
the first year of operation.
It also expects ~20% of the total business to come from the marketplace in the next one year.
Source: Company, MOSL
81
Thematic | E-commerce
Business expansion
Business model
The site gives users (or 'members') access to various curated collections of Indian and Western
fashion labels and lifestyle brands at deep discounts
The company sources its own inventory from local and international distributors
80% of revenues to be targeted from flash sales, while 20% from SKUs that would be available
continuously
Pivoting to an inventory light model to minimize risk of unsold inventory
Business
Investors
Sequoia Capital
Smile Group
Norwest Venture Partners
Intel Capital
Nokia Growth Partners
Vipshop (Chinese discount retailer)
Funding history
November 2014
82
Thematic | E-commerce
Zivame
Zivame
About the company
Business expansion
Business model
Zivame holds inventory for most SKUs and is able to ship them quickly. It aims to reach
INR4b in revenues by FY16
Business scale
Investors
IDG Ventures
Kalaari Capital
Unilazer Ventures
Funding history
November 2014
83
Thematic | E-commerce
Healthkart
HealthKart
About the company
Business expansion
Business model
Business scale
Investors
Funding history
November 2014
84
Thematic | E-commerce
Bigbasket
BigBasket
About the company
Business expansion
Expanding to 10 large Indian cities, including Chennai, Pune, Delhi, Ahmedabad and
Chandigarh in the next few months
Business model
Try and deliver orders same day or next day using own fleet of delivery vehicles
BigBasket directly sources produce from farms and aggregators and provides clients the
farm to home experience
Business scale
BigBasket offers around 12,000 products across several categories like fruits & vegetables,
groceries & staple provisions, bread & bakery products, toiletries, branded food & nonfood products, dairy products, household provisions, confectioneries, and frozen food
such as ice creams
Currently delivers ~5,000 orders per day, with an average transaction value of INR1,600
and expects to generate GMV of INR2.5b in FY15
The company has 70,000+ customers
Investors
Ascent Capital
LionRock Capital
Zodius Capital
Helion Ventures
Funding history
November 2014
85
Thematic | E-commerce
Bluestone
BlueStone
About the company
Business expansion
Business model
Business scale
Investors
Bluestone has access to proprietary international designs and designers, and has its own
manufacturing unit
It also sources collections on order from other manufacturers
Bluestone offers 25,000 design and 10m choices for the customer with zero inventory
costs
Estimated revenue of INR350m in FY14
K Ganesh
Saama Capital
Kalaari Capital
Accel Partners
Ratan Tata
Funding history
November 2014
86
Thematic | E-commerce
UrbanLadder
UrbanLadder
Business expansion
Business scale
Investors
SAIF Partners
Kalaari Capital
Steadview Partners
Funding history
Business model
November 2014
87
Thematic | E-commerce
Travel
MakeMyTrip
Makemytrip.com
About the company
Business statistics
Recent acquisitions
Makemytrip (MMYT) is the largest online travel company in India. MMYT commenced
operations in 2000.
In the first five years following inception, it focused on the non-resident Indian market in
the United States, primarily servicing demand for United States to India air tickets
It started its Indian business with the launch of its Indian website in September 2005
Its services and products include air tickets, hotels, packages, rail tickets, bus tickets, car
hire and ancillary travel requirements such as facilitating access to third-party travel
insurance and visa processing.
Based on 2012 gross bookings, MMYT led the market with 47% market share
Over FY10-14, its gross bookings have grown at a CAGR of 28%, and net revenues at a
CAGR of 27.5%
3.2m+ mobile apps have been downloaded, contributing 29% of total online traffic
Air ticketing is 58% of net revenues (in FY14 and 47% in 1QFY15), and hotels is 38% in
FY14, up from 18% in FY11
November 2012, acquired 100% stake in companies comprising the Hotel Travel Group operating in Southeast Asia. Total consideration is USD25m
In November 2012, acquired 51% stake in ITC group - hotel aggregator and tour operator
in Thailand. Total consideration was USD3.2m
On February 2014, completed the acquisition of entire equity in ETB group, for a total
consideration of USD4.4m.
MMYT has a diverse hotel portfolio of 13,000 domestic lodging properties
Gross bookings and net revenues from hotels are up ~70% in 3 years to USD1.26b and
USD106m respectively
In 1QFY15, hotels were 50% of net revenues, up from 18% in FY11
Annualized transactions in 1QFY15 were 6m, compared to 3m in FY11 and 4.9m in FY14
Source: Company, MOSL
November 2014
88
Thematic | E-commerce
Yatra
Yatra
About the company
Business description
Acquisitions
Business scale
Investors
Funding history
Business outlook /
development
Yatra.com is Indias second largest Online Travel Agency (OTA) with a ~27% market share. It is
based in Gurgaon, founded by former Ebookers Group (UK) executives Mr Dhruv Shringi, Mr
Manish Amin and Ms Sabina Chopra in August 2006.
Besides online ticketing, Yatra is focused on further diversifying its business by growing the
hotels and holiday package business.
At present, hotel bookings constitute 15% of the business, holiday packages ~20% and flight
bookings account for the rest.
Currently, ~12% of actual sales are happening on mobile. In March 2012, Yatra.com
announced Bollywood actor Salman Khan not just as the brand ambassador for the travel
website but also as a shareholder.
In April 2014, announced as Official Travel Partner of IPL Team Rajasthan Royals.
Mobile is growing very rapidlyover 20% of the total traffic and 15% of flight bookings come
from mobile. Surge in mobile has come within the last 12 months.
Yatra is the market leader in domestic hotel bookings in India. It aims to grow the hotels and
packages net revenues to the same scale as those from air ticketing by FY16, by doubling the
domestic hotel tie-ups to 30,000 by December 2015.
Yatra.com has made three acquisitions till now: (1) ticket consolidator Travel Services
International (TSI) in October 2010, (2) global distribution system (GDS) provider,
MagicRooms.in, and (3) Indian events and entertainment portal, BuzzInTown.comall for
undisclosed amounts.
In June 2012, it announced plans to fully acquire Travelguru.com from Travelocity Global. The
acquisition of Travelguru had given Yatra access to a network of more than 6,500 hotels in
India and 72,000 hotels worldwide.
Net revenues in FY14 were ~USD50m
Total Gross Bookings through Yatra were USD800m in FY14, compared to USD1,621m
through Makemytrip.com (MMT). Out of this, gross air ticketing value was USD700m, which
compares with USD944m at MMT.
The Company has ~1,800 employees based in across India, including 900 travel consultants.
In April 2014, Yatra stated that it had reservation facility for more than 12,000 hotels in India
and over 400,000 hotels around the world.
The firm claims that it is doing 20,000 domestic tickets and 5,000 hotels and holiday packages
per day.
In April 2012, it was the second-largest online travel website in India, with 30% share of the
INR370b (USD6.1b) market for all online travel related transactions.
Company stated that it has achieved market leadership in the domestic hotels and holiday
package segment.
In April 2014, Yatra cited that it will break even in 12 months.
On the back of hotel bookings and holiday packages business, it is expecting ~40% revenue
growth in 2014-15.
IDG Ventures
Vertex (Temasek's VC arm)
Reliance Venture Asset Management
Web18 (of TV18 group)
Norwest Venture Partners
Intel Capital
Valiant Capital Management
Yatra has so far raised USD125m in various rounds of funding
Raised USD5m in 2006
Raised an undisclosed amount from Intel Capital in 2008
Raised USD33m in April 2011
Raised USD14.5m in July 2012
Raised USD23m in April 2014
Yatra targets strategic investing of its latest round of capital in mobile technology, besides
strengthening its position in domestic hotels and packages.
In 2012, Yatra stated its ambition was to scale up the revenue to INR70b (2x).
Source: Company, MOSL
November 2014
89
Thematic | E-commerce
Classifieds
Bharat Matrimony
Bharat Matrimony
About the company
Business characteristics
Business segments
Business scale
Strategic initiatives
Bharat Matrimony is the world's leading online matrimony service. It has been recognized by
the Limca Book of World Records for having a record number of documented marriages
online.
Bharat Matrimony was first launched in Tamil before 2000. In 2000, it quickly launched
across all languages in India.
Presently, it exists not only in all Indian languages but has ventured into countries like Sri
Lanka, UAE, Pakistan, etc.
Bharat Matrimony has evolved from an 'Online Match' to 'Match Making' to 'Marriage
Service Provider', thus expanding its target market/opportunity size.
~70% of its lead acquisitions happen organically. Only ~30% happen through Google and
advertisements.
Bharat Matrimony is strong in the 'cow belt' (Uttar Pradesh, Haryana, Punjab, etc), but weak
in the 'MOW belt' (Madhya Pradesh, Orissa and Chhattisgarh). It plans to focus on MOW,
going forward.
It has a total user data base of 50m. Men account for 70% of registrations and women for
30%. 20m are active users, while 2.3m are paid users. Paid users have increased from 7% of
total users in 2009 to 15% currently.
To supplement online services, company has 200 offline centers that help in assisted search.
A store takes about four months to break even. Bharat Matrimony targets 400 stores in the
next 2 years.
Elite Matrimony: This caters to premium match-making for affluent families. The company
derives 5% of its revenue from this segment, where charges are up to INR50,000 per match.
Assisted Matrimony: It also offers personalized match-making at its outlets. Charges are up
to INR19,000 per match. This segment contributes ~15% of total revenue.
Regular Online Matrimony: This is the company's bread-and-butter model from where it
derives ~80% of its revenue. Charges are up to INR3,590 per subscriber.
It has ~2m active users and over 20m registered members. It was recognized by Alexa,
Traffic Estimate and Comscore as most visited matrimonial portal worldwide.
India has ~70m individuals in the marriageable age group of 20-35. Love marriages
constitute just 2% of all marriages in India. The size of online matrimonial market in India
stands at INR5b. Bharat
Matrimony has 70% market share currently. On an average, it achieves 8,000 profile
registrations per day and 1,500 marriages per day.
Company has a market share of 90% in Kerala. It is the undisputed leader in South India and
its core business enjoys 40% margin.
On an average, in each wedding, INR800,000 is spent on expenses like catering, decoration
etc. This is a large unorganized market, which the company is beginning to exploit.
Similarly, marriage return gifts are a large market that the company has ventured into. On
an average, a family spends INR50,000 towards return gifts for relatives.
'Photo Match' is a key technological innovation that Bharat Matrimony undertook. It enables
a user to upload a photograph of a celebrity with the desired profile (slim, fair etc) and find
matches accordingly.
Every year, company has been taking price hikes of 5-10% without impacting the growth of
paid subscription, substantially.
Source: Company, MOSL
November 2014
90
Thematic | E-commerce
Zomato
Zomato
About the company
Business expansion
Business model
Business scale
Investors
Funding history
November 2014
91
Thematic | E-commerce
Quikr
QUIKR.COM
About the company
Business description
Business scale
Strategic investments
/Acquisitions / Milestones
Investors
Funding history
Business outlook /
development
Quikr is one of the Indias largest online and mobile classifieds portals based in Mumbai,
India.
Mr Jibi Thomas and Mr Pranay Chulet had co-founded Quikr in 2008 as Kijiji India where Mr
Thomas was head of operations. Kijiji.in was re-branded as Quikr.com with more investors
coming in.
In July last year, Mr Thomas quit the firm to launch a digital marketing company called Web
Butter Jam.
Quikr was launched on 12 July 2008 and is currently present in 900 cities across India. Quikr
provides the local community with a platform to help them buy, sell, rent and find something
and address needs across many categories.
Quikr gets more than 30 million unique visitors a month on its website
It has presence in over 940 cities in India and operates in 13 categories and in 170 subcategories, which range from mobile phones, real estate, cars, services, jobs, entertainment,
furniture, electronics and many more.
Quikr is a large-scale, cross-category online classifieds business with more than 32 million
monthly customers and small business users in 1,000 cities.
Its consumer base primarily comes to Quikr to sell, buy, rent or find products and services
across categories such as electronics and household goods, real estate, cars, bikes and
employment, among others.
It has raised a total of ~USD200m in funding till now.
The company has three revenue streams like any other online classifieds company - premium
listings, leads generation and advertising that contribute to an estimated revenue run-rate of
USD50.
CEO had cited earlier in 2014 that Quikrs revenue had grown five times over the past 12
months.
Latest round of funding valued the firm at around USD240m.
The capital (USD60m raised in September 2014) from the latest round will be used to invest
in product development as well as to further expand its mobile business.
November 2014
92
Thematic | E-commerce
People Group
People Group
About the company
Being an NRI, promoter Mr Anupam Mittal first launched Shaadi.com in the NRI market in 1996.
Later, it was expanded to cater to the pan-India market.
Makaan.com is the real estate search arm, which was launched after Shaadi.com.
Other businesses include Mauj Mobile, largely focused on mobile app aggregation.
Group divisions
People Group is made up of three companies - People Interactive, People Infocom and People
Pictures.
People Interactive is the consumer Internet arm of the group and owns the extremely
successful matrimonial portal, Shaadi.com, along with real estate site, Makaan.com, and
friendship and social networking service, Fropper.com.
Infocom is a Managed Services Provider to telecom operators, media-entertainment
companies and consumer brands. It extends services in managing these applications and
facilitating content on them through its popular brand, Mauj Mobile.
People Pictures is in media production and was founded to explore the market for new-age
Indian cinema. Flavors, an NRI cult hit released in 2005, and 99, released in 2009, are the
biggest hits of those summers.
Shaadi.com
Shaadi.com achieves 10,000 profile registrations a day. Only paid users can access contact details
of the profile they like. Average realization per paid user is INR5,000 for a usage period of three
months. To supplement online services, the company has 100 offline centers, which help in
assisted search, especially for parents looking to get their children married.
People Group's real estate portal, Maakan.com, is more focused on the C2C market, where broker
involvement is less.
Makaan.com
Strategic initiatives
Mobile searches are witnessing explosive growth; People Group expects >50% contribution
from mobile, post July 2014.
Company is focusing on providing a clutter-free experience to users (no/ low
advertisements). It has been consistently striving to match users' unique requirements.
Source: Company, MOSL
November 2014
93
Thematic | E-commerce
Allied/Parallel
Mydala
MYDALA
About the company
Business characteristics
Key statistics
MyDala started its business four years ago. Currently, it has 120,000+ merchants and targets
to reach over 1m merchants in next 12 months. As at June 2014, it had 32m visitors.
MyDala has effectively been able to adopt global businesses to Indian ecosystem to turn
profitable much faster than its global pears itself. It executes 4m transactions per month and
over 25m customers have used MyDala services.
Coupons, as available on sites like Groupon, typically are branding efforts of the merchant in
which they are not necessarily making money. What Groupon thus offers are deep discounts
on the purchase of any product / service.
MyDala, on the other hand, is a platform on which the seller can market his discounts. So,
while the promotional discount is there for the taking, through MyDala, the offer reaches to
the targeted audience most effectively. For example while a restaurant may be running the
offer of discounted lunch buffet on weekdays, it may still want to reach out to MyDala to
address the communication to the localized target audience, and in return share a fee from
the sale made through MyDala.
Low cost customer acquisition for local merchants through a hyper local mobile-focused
targeted advertising approach have been MyDala's USPs
It enables brands/ retailers to distribute hyper targeted advertising based on user
demographic which includes but not limited to location, past usage, age, gender, spending
patterns, kind of device, data connection plan and host of 40 different variables. This hyper
analytics is far more targeted than a generic platform like google and facebook itself. For
example, if P&G were to generate trial purchase of customers in Bhopal living in Arera Colony,
who have prepaid connections and are data subscribers, MyDala would be the only platform
for them to do that.
MyDala earns revenues from two sources: (1) tie-ups with TSPs (~20% of revenues), and (2)
through its own website and mobile app (80% of revenues), where users downloads coupons
Merchant quality is among key risks to the business. The company needs feet on the ground
looking over the same. At any point of time it is evaluating ~15k merchants for quality
parameters.
Info Edge was among the early investors in the company. Info Edge instilled the focus on
generating profitable growth, and also towards establishing a large sales fleet on the ground.
Cost of customer acquisition is INR6 for MyDala as compared with INR300-800 for ecommerce players.
Groupon runs 1,000 deals per month while MyDala runs around 40,000 deals a month across
200 cities.
Around 80% of traffic is organic
Visitors to MyDala network: 35m per month, growing at 10% MoM
Transactions on MyDala network: 4m per month
Plans to start innovative products like live offers valid for 1 or 2 hours and expand product
lines
MyDala's biggest asset is the huge database of customers and its bigdata analytics engine
which based on user's dynamic usage pattern, location, mobile credit/bill and buying
preferences would offer the best suitable deals to the customers.
Source: Company, MOSL
November 2014
94
Thematic | E-commerce
November 2014
95
Thematic | E-commerce
Ecosystem
Pay Point India
Paypoint India
Business summary
Business statistics
Strategic initiatives
Pay Point India was started in 2009, with a vision to facilitate and simplify methodologies of
making and processing payments anywhere and everywhere. The promoter defines his
business as Fast Moving Consumer Services (FMCS).
Company is a payment collection hub that facilitates collection of bills of various utility
service providers, issue of movie, transport, airline and railway tickets and recharge of
prepaid mobile phones
It accepts payments in all modes - cash, cheque, credit cards. It provides easy access to topup facility in all possible modes and anywhere across the country.
It operates on a 24x7x365 module. Pay Point operates on the vendor chain cycle. Vendors
include shopkeepers, chemists and petrol pumps in the neighborhood. Vendors issue a
receipt immediately over the counter for the payments made to them. The payment details
are sent online to the service providing companies.
Business potential is huge. Indian Railways sells 3.5b tickets annually. Every household has at
least three utilities bills to pay every month. In banking, there are numerous transfer
requirements for migrants, generating a large transactional volume.
Pay Point has a network of 6,000 distributors pan India, who execute the transactions for end
customers. Transaction processing for utility bills is pretty quick - 30 seconds as only the bar
code needs to be scanned.
Revenue stream for the business is two-fold - one from service providers and the other as
commission on sales of high margin products like air tickets.
Retailers need to put money upfront for any transaction. Hence, there is no risk of credit loss.
Money remittance has evolved to be a big business for the company, largely through
labor/migrants living in cities, who have to remit wages back home.
50% of revenue comes from financial products, 30% from utilities and 20% from mobile
recharge.
In a small district like Jawahar in Maharashtra, migrants were required to open accounts with
the State Bank of India (SBI) instantly to claim NREGA benefits. SBI itself could not open these
accounts due to capacity constraints. Pay Point opened 30,000 accounts in 45 days,
displaying the power of its reach.
Source: Company, MOSL
November 2014
96
Thematic | E-commerce
DTDC
DTDC
Business summary
DotZot
Strategic intent
DTDC is one of the largest Indian players in the Express, Courier & Logistics Services
industry. It is also credited with pioneering the franchisee concept for the courier
industry in India and presently has the largest network in the country, with 6,500
channel partners.
DTDC's services range from domestic to international delivery, premier express, supply
chain solutions, new world retail, warehouse services etc.
Company has 281 own offices and 6,500 channel partners spread across the country. It
serves nearly 10,000 pin codes, delivering 11.5m consignments per month.
Over the years, DTDC has successfully transformed into a full scale supply chain solutions
provider, offering domestic and international express, freight, transportation, logistics
management, warehousing and distribution services.
In July 2013, GeoPost SA took 40% stake in the company. GeoPost is a leading player in
express service in Europe, ranked No. 1 in France and No. 2 in Europe. It serves 230
countries worldwide. The partnership will help DTDC to gain a larger international
footprint and enable global dominance in B2B and B2C markets.
Launched in mid-2013, DotZoT is the first pan India delivery network, focused exclusively
on the e-commerce/e-retail space. It is backed by DTDC's size, scale and reach and covers
8,000 plus pin codes and 2,300 cities across India.
DotZot aims to bridge the gap faced in logistics infrastructure by providing superior
logistics solutions to e-retailers, who are increasingly looking to enhance customer
shopping experience. DotZot ensures constant visibility of shipments and real-time flow
of information. It offers superior value and reliability to e-retailers.
DTDCs current strategy in keeping with its Mission 1000 and Vision 2020 is to
consolidate its current position and constantly introduce new services and products that
are relevant to the needs of consumers.
To combat competition, DTDC is heavily investing in technology, infrastructure, brand
development and network expansion. A three-year program that started last year,
involves an investment of over INR250m in brand building and a complete upgrade and
standardization of all DTDC outlets. DTDCs road map for growth is to aspire to be an
INR50b company from the present level by 2020.
Source: Company, MOSL
November 2014
97
Thematic | E-commerce
PAYU
PayU
About PayU
PayU is one of the largest consumer payment processor globally, with operations in multiple
countries and a clear leader in the Indian market. USD25b media and internet giant is the parent
company.
Merchant base
PayU today has 36,000+ merchants. The company is adding ~4,500 merchants on a monthly.
These fall into three main categories.
E-commerce typical e-tailing transactions
Non- ecommerce: this includes billers, Government, Insurance, IRCTC, airlines etc.
Offline small sized merchants who collect payments online or through mobile occasionally.
PayU has two websites PayU.in and PayUmoney.com. Bulk of the smaller merchants is in
PayUmoney.com. It is a It also aids buyers, with features like buyer protection, and other services
like reward points. PayU.in is purely an e-commerce oriented payment gateway service. It is
primarily meant for large merchants
Outside of India it is also a prominent player in regions like Central Eastern Europe, Latin
America, and Africa.
PayUs services are used by leading companies like goibibo.com (group company),
snapdeal.com, bookmyshow.com, freecharge, Jabong.com, Groupon India, BigBasket.com,
pepperfry.com,
The company claims to be among the most aggressive player in the market in terms of pricing
Source: Company, MOSL
November 2014
98
Thematic | E-commerce
Business expansion
Business model
Sale of digital content like full length music tracks, videos, movies, ringtones, other mobile
content and apps across various categories
As India's leading Digital agency, working with brands on digital/mobile campaigns
Monetization of gaming content (own IP for 600 flashgames)
Business scale
2.5 million content pieces across various genres and languages in the form of music
tracks, movies, music videos and mobile content, including includes a movie catalog over
5,000 full length movies and television titles, acquired through content partnerships with
movie studios like Yash Raj Films, T-Series, Reliance Home Video, Ananda Video, Ultra,
Shemaroo, Krishna and Kavitalaya
Partnerships with over 400 content creators, record labels, studios, broadcasters, game
publishers on a worldwide exclusive basis for digital and mobile content
Hungama has successfully managed more than 2000 mobile and digital campaigns for as
many as 350 brands globally
Won close to 100 international awards across Mobile Entertainment, Digital Advertising
and Gaming
It claims to power around 75% of all mobile entertainment content in India
It has conceptualized and created over 100 games around Bollywood and Indian films
Runs the website BollywoodHungama.com, which has 7 million visitors a month
Investors
Rakesh Jhunjunwala
ICICI Venture (exited)
Reliance Capital
Intel Capital
Bessemer Venture Partners
Funding history
November 2014
99
Thematic | E-commerce
November 2014
100
Thematic | E-commerce
November 2014
101
Thematic | E-commerce
November 2014
102
Thematic | E-commerce
The rise of e-commerce poses new questions for taxation policies and
administration. E-commerce blurs the distinction between the sale of goods, the
provision of services, and licensing of intangible assets. Each of these is subject
to some form of taxation.
According to media reports, tax authorities in Bangalore, the capital of
Karnataka, are looking into why Amazon India does not pay value-added taxes
as required under the VAT Act, 2003 on goods stored in its warehouses. Tax
officials have told Amazon that since the company stores products from
thousands of merchants in the same warehouse, it is, in practice, acting as more
than just a service provider. If that is the case, then Amazon is also in principle
flouting the FDI norms.
While the growth proposition of the industry is hard to bet against, clarity is
required on issues like FDI and state-level taxation for a smoother run in online
sales. The government is opening up to take a stance DIPP (Department of
Industrial Promotion and Policy) has asked for comments, reviews and
suggestions from industry players and those associated with the online retail
industry in the discussion paper it released on 30 January 2014.
November 2014
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Thematic | E-commerce
Disadvantages
DIPP has put out a
discussion paper to seek the
views of relevant
stakeholders on the various
pros and cons of FDI in
Retail
November 2014
Works against spirit of FDI policy in MBRT: Allowing FDI in e-commerce will
provide e-retailers complete geographical reach. This will be against the spirit of
FDI in multi-brand retail (restricted to cities with a population of more than one
million or any other city as per the choice of consenting states).
India is not yet ready for opening up the e-retail space to foreign investors. It
will seriously impair small-time trading of brick and mortar stores. Small-time
shopkeepers are not highly qualified and will not be able to compete with a
sound e-retail business format.
Because of scale of economic operations, e-commerce players in the inventorybased model will have more bargaining power than standalone traders and will
resort to predatory pricing.
The infrastructure created by major e-commerce players will be captive and the
government will not be able to achieve its objective of creating back end
infrastructure.
The Indian e-commerce market is at a nascent stage of development. FDI in ecommerce could have an adverse impact on the domestic industry. It could lead
to monopolies in e-commerce, manufacturing, logistics and retail sector.
Inventory-based e-commerce competes directly with MSMEs. Indian ecommerce B2C is growing in an eco-system with Indian-owned/led companies
offering open marketplace models, which provide a technology platform to help
MSMEs reach across India and even globally. These marketplaces do not
compete with MSMEs or retailers and allow everyone to trade. On the other
hand, allowing the entry of inventory-based large foreign e-retailers may shrink
Indian entrepreneurship and the MSME sector.
104
Thematic | E-commerce
Exhibit 124: Differential revenue recognition methods / business models drive stark differences in OPM
November 2014
Exhibit 127: but Amazon has higher capex and lags FCF
105
Disclosures
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Thematic | E-commerce
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