aurum insights · aurum insights internet related businesses _____ annual newsletter 2015 aurum...

Aurum Insights Internet Related Businesses___________________________Annual Newsletter 2015

Aurum Equity Partners LLP

“Large horizontal e-commerce players attracted substantial funding, with Flipkart and Snapdeal

leading the pack. Flipkart raised an aggregate of US$ 1.9 billion across 3 rounds involving new as

well as existing investors. Snapdeal also attracted large sums with total investment of US$ 860

million across 3 rounds. Alibaba’s major shareholder Softbank marked its entry into Indian e-

commerce market with a major investment (US$ 627 million) in Snapdeal, making the battle for

domination more interesting. ”

Read more on the M&A action in this issue.

“Fund raising momentum is expected to sustain in 2015,with investors placing long term bets on India’sconsumption story and favorable demographics. Aurumbelieves that companies will continue to spend large sumsof capital to reach out to a larger consumer base throughincreased marketing budgets and discounts.”

Anshul GuptaAurum Equity Partners LLP

[email protected]

‘Internet related Businesses’ was one of the most active sectors in terms of deal activity inIndia in 2014. The combination of a large user base and low penetration is leadinginvestors, both global and domestic, to allocate large sums of capital, with no signs ofmoderating in the near term. Telecom giant Softbank pledged an investment of US$ 10billion in India’s telecom and e-commerce space. Also, Beenos, the global incubation andinvestment wing of Japan’s largest e-commerce conglomerate Netprice.com, was reportedto be eyeing investments in the Indian e-commerce market.

India boasts of the third largest Internet user base globally, estimated at 213 million andexpected to reach 564 million by 2020. The behavioral shift towards online is driving thedemand for Internet-based products and related services. In just 5 years, the e-commercemarket has grown five folds, from US$ 2.5 billion in 2009 to US$ 13 billion in 2013. Thesector is still in its infancy, with online retail accounting for only less than 1% of thecountry’s retail market, indicating significant headroom for growth.

Mobile represents an integral part of this internet story and is likely to play a key role inexpanding penetration. The primary mode of internet access for consumers in India isgoing to be through the mobile, particularly in the Tier 2/3 cities.

2Private and Confidential For limited circulation only


Larger horizontal e-commerce players attracted substantial funding, with Flipkart andSnapdeal leading the pack. Flipkart raised an aggregate of US$ 1.9 billion across 3 roundsinvolving new as well as existing investors. Snapdeal also attracted large sums with a totalinvestment of US$ 860 million across 3 rounds. Alibaba’s major shareholder Softbank,marked its entry into the Indian e-commerce market with a major investment (US$ 627million) in Snapdeal, making the battle for domination more interesting. Amazoncommitted US$ 2 billion for its India expansion plans. Horizontal players are investingconsiderable resources to bring more users to transact online. This is resulting in theemergence of increasing number of new product categories, thereby driving rapid growth.

Niche vertical-focused companies are trying to capitalize on these new categories andscaling up quickly – Urban Ladder (raised US$ 20 mn) and Pepperfry (raised US$ 15 mn) inFurniture, First Cry (raised US$ 15 mn) in baby products, Lenskart (raised US$ 25 mn) ineye-wear, Bluestone (raised US$ 10 mn) in jewellery are some examples. Investors alsoplaced their bets on other online categories such classifieds (Zomato, Quickr and Olx), realestate portals (Commonfloor and Housing.com), cabs (Ola and Taxiforsure) and Travel(Stayzilla and HolidayIQ).

Private equity funds also demonstrated inclination to invest in companies that provideservices to E-commerce companies such as payments, logistics, packaging and supplychain management. E-commerce logistics company, Delhivery raised US$ 35 mn in 2014.

On the M&A side, larger players acquired niche companies either to consolidate theirdomestic presence or enter newer geographies. Zomato led the race in overseasacquisitions, acquiring companies in Czech Republic, Slovakia and New Zealand. Zomato’sglobal ambitions are expected to set an example for other product start-ups to thinkbeyond India. Rocket International incubated global company Foodpanda also acquiredentities in Serbia, Croatia and Hungary.


Large horizontal players consolidated their domestic presence acquiring smallercompanies in a bid to provide end-to-end product portfolio/ services. Flipkart acquiredMyntra Designs to strengthen its apparel division in a US$ 330 million transaction. Amazonwas also reported to be in talks to acquire Jabong for US$ 1.2 billion. In another smallertransaction, Snapdeal acquired Wishpicker.com, an online gift recommendation portal.

Fund raising momentum is expected to sustain in 2015, with investors placing long termbets on India’s consumption story and favorable demographics. Aurum believes thatcompanies will continue to spend large sums of capital to reach out to a larger consumerbase through increased marketing budgets and discounts. Also since there is an increasingrecognition of mobile as the next engine for growth, a lot of transaction activity isexpected in the Mobility space. Niche ventures which allow consumer facing companies tomake their back-end more efficient or add value to buyers/ sellers should attract investor’sattention. Emerging categories such as cab aggregators, financial products distribution,innovative travel solutions and other new categories, having consumption as anunderlying theme will also garner investor interest.

Aurum believes there will be increased M&A activity, with consolidation picking up pacethis year. Larger companies will aggressively scout for companies that can offer themopportunities to outdo competitors or boost growth. Companies offering related servicessuch as loyalty programs, payment gateways, logistics, customer analytics etc. areexpected to catch attention of larger players and get acquired. Also horizontal e-commerce players are expected to plug their portfolio specific gaps through acquisitions.


Date Company InvestorsAmount

(US$ mn)

26/12/2014 Policy Bazaar

PremjiInvest, Tiger Global Management

LLC, Inventus Capital Fund II, Iconiq

Capital

63

22/12/2014Flipkart Online Services

Private Limited

Tiger Global Management LLC, Qatar

Investment Authority, GIC Singapore, DST

GLOBAL,T. Rowe Price Associates,

Steadview Capital, Baillie Gifford,

Greenoaks Capital, Iconiq Capital

700

16/12/2014 Housing.com

Qualcomm Ventures, Helion Advisors

Private Limited, SoftBank Corp, DST

GLOBAL, Nexus Venture Partner, Falcon

Edge Capital

90

26/11/2014PayMate India Private

LimitedLightbox Ventures I 30

19/11/2014Zomato Media Private

Limited

Sequoia Capital India, Info Edge (India)

Limited, Vy Capital60

28/10/2014 Snapdeal

Temasek Holdings Advisors India Pvt. Ltd,

PremjiInvest, SoftBank Corp, BlackRock

Private Equity Partners, Myriad Asset

Management Company (Honk Kong),

Tybourne (Hedge fund), SoftBank Internet

and Media Inc

627

27/10/2014 Olacabs SoftBank Corp 210

13/10/2014 CarTrade.com

Canaan Partners, Warburg Pincus

International, Tiger Global Management

LLC

30

25/9/2014 Commonfloor Tiger Global Management LLC 30

Select Fund Raising Transactions – 2014



18/9/2014 Quikr India Private Limited

Matrix Partners India, Norwest Venture

Partners, Omidyar Network India Advisors

Private Limited, Warburg Pincus

International, eBay Inc., Tiger Global

Management LLC, Investment AB

Kinnevik, Nokia Growth Partners

60

16/9/2014 Power2SME

Inventus Advisory Service (I) Pvt. Ltd, Accel

Partners, Kalaari Capital Advisors Private

Limited

7

12/9/2014 BigBasketAscent Capital, Zodius Capital, Lionrock

Capital, Helion Venture Partners LLC33

27/8/2014Zoomin Online India

Private Limited

First Round Capital, Lightbox Ventures,

Gund Investments8

21/8/2014 Taxiforsure

Helion Venture Fund II, Bessemer Venture

Partners, Helion Advisors Private Limited,

Accel Partners

30

12/8/2014 Foodpanda Rocket Internet 60

24/7/2014Flipkart Online Services

Private Limited

T. Rowe Price International Inc, Tiger

Global Management LLC, Accel Partners,

Naspers, GIC, DST GLOBAL, Morgan

Stanley

1,000

16/7/2014Urban Ladder Home Decor

Solutions Private Limited

Kalaari Capital Advisors Pvt Ltd., SAIF

Partners, Steadview Capital20

10/7/2014 Olacabs

Matrix Partners India, Sequoia Capital

India, Tiger Global Management,

Steadview Capital

42

19/6/2014 Housing.com

Qualcomm Ventures, Helion Advisors

Private Limited, Nexus India Capital

Advisors Private Limited

19

18/6/2014 Bookmyshow SAIF Partners,Capital18, Accel 25



9/6/2014 FashionAndYou

Norwest Venture Partners, Intel Capital,

Sequoia Capital India, Nokia Venture

Partners, Smile Group

10

27/5/2014 Policy Bazaar Unknown Investors 20

27/5/2014 Pepperfry.comNorwest Venture Partners, Bertelsmann

India Investments15

26/5/2014 Snapdeal

Tiger Global Management LLC, Naspers

Limited, Accel India Venture Fund III,DST

GLOBAL

210

21/5/2014 Snapdeal

Temasek Holdings Advisors India Pvt. Ltd,

PI Opportunities Fund I, BlackRock, Myriad

Asset Management Company (Honk

Kong), Tybourne (Hedge fund)

100

6/5/2014 LimeRoad.com

Matrix Partners India, Tiger Global

Management LLC, Lightspeed Venture

Partners VIII Mauritius

15

17/4/2014 Taxiforsure

Helion Venture Fund I, Bessemer Venture

Partners, Blume Ventures Fund I, Accel

India Venture Fund III

10

18/3/2014Bluestone Jewellery And

Lifestyle

Accel India Venture Fund III, Saama

Capital, Kalaari Capital9

12/3/2014 Quikr India Private Limited

Matrix Partners India, Norwest Venture

Partners, Omidyar Network India Advisors

Private Limited, eBay Inc., Nokia Venture

Partners, Investment AB Kinnevik

90

28/2/2014 Snapdeal

Bessemer Venture Partners, eBay Inc.,

Intel Capital, Saama Capital India Advisors

LLP, Kalaari Capital Partners II, Nexus

Venture Partner

134

5/2/2014 Foodpanda Phenomen Ventures 20

8/1/2014 Firstcry Vertex Venture Management Pte Ltd 15


Select M&A Transactions – 2014

Date Target Acquirer Size

18/12/2014 Donesi.com Foodpanda NA

18/12/2014 NetPincer Foodpanda NA

18/12/2014 Pauza.hr Foodpanda NA

11/12/2014 Wizmunk Gifting Services Snapdeal NA

21/11/2014 BuyNBragUrban Ladder Home Decor

Solutions Private LimitedNA

18/11/2014 TastyKhana Foodpanda NA

13/11/2014 Meals On Wheels Antfarm Business Incubator NA

30/09/2014 Gaadi.com CarDekho NA

22/08/2014 Lunchtime.cz Zomato Media Private Limited 1

22/08/2014 Obedovat.sk Zomato Media Private Limited 2

01/07/2014 Menu Mania Limited Zomato Media Private Limited 1

28/05/2014 Coupondunia Media Times Internet Limited NA

21/05/2014Myntra Designs Private

Limited

Flipkart Online Services Private

Limited330

14/05/2014Infibeam Digital

Entertainment

Sony Music Entertainment India

Private LimitedNA

30/04/2014 Cleartrip Private LimitedConcur Technologies, Lightbox

Ventures INA

14/03/2014 Dhingana Entertainment Rdio Inc NA

07/02/2014 Musicfellas Entertainment Times Internet Limited NA

The Aurum Perspective on select transactions -

In May 2014, Flipkart acquired online fashion retailer Myntra for a consideration of ~

US$ 330 mn to create one of the largest ecommerce stories in the country. Deal was

structured with a holding company in which the founders of the two companies and

their investors and employees will hold stakes. Both companies had three common

investors Tiger Global, Accel Partners and Belgian family office Sofina who are said to

have played a major role in stitching together the transaction.

Aurum Perspective

Flipkart acquired Myntra, the market leader in high margin apparel segment to consolidate its

presence in the Indian e-commerce space. Prior to the transaction, Myntra had a market share of

30% in the apparel segment, compared to Flipkart’s 20%. Aurum believes the transaction to be a

win-win for both the companies as it provided Myntra’s shareholders with a huge upside that

Flipkart offers with its large end-to-end addressable market and provided Flipkart a head start to

Amazon in terms of apparel category.



In December 2014, Flipkart raised its last round of funding for the year, pegged at US$

700 million. With this, it also filed an application with Singapore based companies'

regulator ACRA to become a public company, as it is a mandatory procedure for all

companies where the number of shareholders exceeds 50. This round of funding added

new investors - Baillie Gifford, Greenoaks Capital, Steadview Capital, T. Rowe Price

Associates and Qatar Investment Authority on Company's board.

Aurum Perspective

Flipkart raised an aggregate of US$ 1.9 billion in 2014, with investors queuing up to

participate in India’s e-commerce space. Flipkart is one of the front runners in the online

space and is anticipated to be the biggest beneficiary of the internet revolution that we are

witnessing. Company was the first one to break the volume and velocity barrier by

innovating on business model – Cash On Delivery (COD), investment in logistics

infrastructure etc. This is evident from the fact that the Company sold products worth INR

6, 500 million in 10 hours in a special one-day event - "The Big Billion Day". According to

press reports, Flipkart’s valuation increased from US$ 7 billion in June 2014 (when it raised

US$ 1 billion fresh funding) to US$ 10 billion in December 2014 (when it raised US$ 700

million). Aurum believes Flipkart will continue to attract more capital, in its bid to

dominate India’s high potential e-commerce market and is one of the best positioned

domestic players to take on international giants such as Amazon.



In October 2014, Japanese telecom and internet firm SoftBank Corp. invested US$ 627

million in Indian e-commerce marketplace Snapdeal.com, making it the largest

shareholder in the firm. The deal was routed through SoftBank Internet and Media, Inc.

(SIMI), a new unit created under Nikesh Arora (former top official at Google). Snapdeal

plans to use these funds to ramp up its efforts in technology and supply chain

management, in addition to making three-four strategic acquisitions, specifically in the

area of mobile technology. Snapdeal also received funding from Ratan Tata earlier this

year.

Aurum Perspective

Snapdeal raised close to US$ 1 billion this year in its bid to dominate India’s e-commerce space.

The Company reduced the gap with Flipkart, roping in an international giant such as Softbank,

lending a new credibility to its business model and operational prowess. With Flipkart, Snapdeal

and Amazon battling it out for domination, these companies will continue to spend large sums of

capital on marketing/ promotions to build customer loyalty and in the process attract lots of

investor’s money.



In October 2014, Taxi service aggregator Olacabs raised US$ 210 million from Japan's

SoftBank Corp at a valuation of nearly US$1 billion. Ola, which is now launching its

service in one city every two weeks, claimed to have around 33,000 cars on its platform.

In about three and a half years since inception, it has built a presence in 19 cities so far.

Company also counts Tiger Global, Matrix Partners and Steadview Capital as its

investors.

Aurum Perspective

Softbank’s investment in Ola Cabs marks an interesting development where a global investor

backed an Indian company to compete with a global giant (Uber). ‘Online cabs’ space is changing

the way people commute locally and is going through an extremely high growth phase. Business

models have shifted from asset heavy radio taxi companies (Meru, Easy Cab) to asset light online

aggregator companies (OIa, Taxiforsure, Uber). As per estimates, this segment is valued at INR 11

billion annually and is growing at 35%. Estimates predict presence of 500,000 to 1 million cabs in

India, with 98% of them operating in the unorganized segment.

Aurum believes there is a huge market opportunity in this space and two domestic players Ola Cabs

and Taxiforsure (was in talks to raise US$ 180-240 million in Nov 2014) are best positioned to take

advantage. Multinational giant Uber, with all its recent problems, is also expected to pose a stiff

challenge.

Note: In line with ‘domestic consolidation’ theme, Ola Cabs is said to be in discussions to acquire

Taxiforsure for US$ 150 million.



In November 2014, restaurant search and discovery portal Zomato raised US$ 60 million

in a fresh round of funding from new and existing investors, valuing the company at US$

660 million. Funding round was led jointly by existing investor Info Edge (India) Ltd and

new investor Vy Capital, with participation from Sequoia Capital. Company plans to use

the funds to accelerate its global expansion and develop new products. In the past,

Zomato has raised US$ 53 million from Info Edge (India) Ltd and Sequoia Capital over

multiple rounds.

Company made four overseas acquisitions in Czech Republic, Slovakia, Poland and New

Zealand, rapidly enhancing its global presence. Zomato is focusing on expanding

presence in Europe and prefers to acquire and partner with a dominant local player.

Aurum Perspective

Zomato envisages to be a global restaurant discovery player and competes with NYSE listed Yelp.

Company has been growing rapidly through both organic and inorganic route and has presence in

18 countries till now. With the latest funding round, Zomato plans to expand to 14 more countries

across Europe, South-East Asia, Australia, and the Americas. Aurum believes Zomato will continue

to attract capital and expand quickly as it has already passed the initial learning curve and the

Company is poised for strong growth in the next 2-3 years.



In December 2014, real estate listing portal Housing.com raised US$ 90 million in fresh

funding, led by SoftBank Corp., with participation from New York-based hedge fund

Falcon Edge Capital and existing investors. Housing plans to use the funds to map 40

million houses across 300 cities, in addition to providing ‘on’ and ‘off’ buttons to home

owners and agents that will convert all the curated house database into assets for

Housing.com and can be reactivated when they are again available in the market.

In June 2014, Housing had raised US$ 19 million in funding from Helion Venture

Partners, Nexus Venture Partners and Qualcomm Ventures. Previously, it had raised US$

2.5 million in its pre-Series A funding from Nexus. Earlier, it had attracted two rounds of

angel funding.

Aurum Perspective

Housing.com is pioneering the real estate classified market in India with its innovative and

technology-oriented product offering. Housing was India’s first map based real estate search portal

founded on the lines of NASDAQ listed Zillow in US. Company is redefining the product scope in its

category with newer features such as Slice View technology (augmented reality feature to the

homes-booking feature) and a platform that enables users to create and customise their rental

agreements online. Aurum believes Housing is best positioned to leverage the increasing use of

online channel in real estate related transactions and is set to attract more capital as it grows in

terms of geographic coverage and product offering.


Aurum was established, as a mid-market focused; transaction oriented; investment banking firm,

by a team of professionals with decades of experience in investment banking, private equity and

general management.

Aurum advises clients on M&A, Divestitures, Fund Raising and Restructuring, focusing on

sectors that are in the high-growth trajectory. The Aurum team’s experience in handling large

and complex transactions helps in accelerating the speed of response that the Client needs to

demonstrate, in order to close transactions in a competitive environment. We have the ability to

structure deals derived from understanding the client's strengths and constraints, further

enabled by understanding of market trends and relevant regulatory environment.

www.aurumequity.com

For any further queries and information, please write to us at [email protected]

15

Disclaimer: This report is presented solely for the internal use of the recipient to whom it is marked byAurum Equity Partners LLP (‘Aurum’) and does not carry any right of publication or disclosure to any otherparty. This report has been prepared on the basis of information obtained from publicly available,accessible resources. Aurum has not independently verified all the information given in this report. NeitherAurum nor its affiliates, partners, directors, employees, agents or representatives, shall be responsible orliable in any manner, directly or indirectly, for the contents or any errors or discrepancies herein or for anydecisions or actions taken in reliance on the report.

Private and Confidential For limited circulation only

aurum insights · aurum insights internet related businesses _____ annual newsletter 2015 aurum...

Documents