aurum aurum insights internet related businesses _____ annual newsletter 2015 aurum equity partners
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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’s consumption story and favorable demographics. Aurum believes that companies will continue to spend large sums of capital to reach out to a larger consumer base through increased marketing budgets and discounts.”
Anshul Gupta Aurum Equity Partners LLP
‘Internet related Businesses’ was one of the most active sectors in terms of deal activity in India in 2014. The combination of a large user base and low penetration is leading investors, both global and domestic, to allocate large sums of capital, with no signs of moderating in the near term. Telecom giant Softbank pledged an investment of US$ 10 billion in India’s telecom and e-commerce space. Also, Beenos, the global incubation and investment wing of Japan’s largest e-commerce conglomerate Netprice.com, was reported to be eyeing investments in the Indian e-commerce market.
India boasts of the third largest Internet user base globally, estimated at 213 million and expected to reach 564 million by 2020. The behavioral shift towards online is driving the demand for Internet-based products and related services. In just 5 years, the e-commerce market has grown five folds, from US$ 2.5 billion in 2009 to US$ 13 billion in 2013. The sector is still in its infancy, with online retail accounting for only less than 1% of the country’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 in expanding penetration. The primary mode of internet access for consumers in India is going to be through the mobile, particularly in the Tier 2/3 cities.
2Private and Confidential For limited circulation only
3Private and Confidential For limited circulation only
Larger 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 a total investment 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$ 627 million) in Snapdeal, making the battle for domination more interesting. Amazon committed US$ 2 billion for its India expansion plans. Horizontal players are investing considerable resources to bring more users to transact online. This is resulting in the emergence of increasing number of new product categories, thereby driving rapid growth.
Niche vertical-focused companies are trying to capitalize on these new categories and scaling up quickly – Urban Ladder (raised US$ 20 mn) and Pepperfry (raised US$ 15 mn) in Furniture, First Cry (raised US$ 15 mn) in baby products, Lenskart (raised US$ 25 mn) in eye-wear, Bluestone (raised US$ 10 mn) in jewellery are some examples. Investors also placed their bets on other online categories such classifieds (Zomato, Quickr and Olx), real estate 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 provide services to E-commerce companies such as payments, logistics, packaging and supply chain 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 their domestic presence or enter newer geographies. Zomato led the race in overseas acquisitions, acquiring companies in Czech Republic, Slovakia and New Zealand. Zomato’s global ambitions are expected to set an example for other product start-ups to think beyond India. Rocket International incubated global company Foodpanda also acquired entities in Serbia, Croatia and Hungary.
4Private and Confidential For limited circulation only
Large horizontal players consolidated their domestic presence acquiring smaller companies in a bid to provide end-to-end product portfolio/ services. Flipkart acquired Myntra Designs to strengthen its apparel division in a US$ 330 million transaction. Amazon was also reported to be in talks to acquire Jabong for US$ 1.2 billion. In another smaller transaction, Snapdeal acquired Wishpicker.com, an online gift recommendation portal.
Fund raising momentum is expected to sustain in 2015, with investors placing long term bets on India’s consumption story and favorable demographics. Aurum believes that companies will continue to spend large sums of capital to reach out to a larger consumer base through increased marketing budgets and discounts. Also since there is an increasing recognition of mobile as the next engine for growth, a lot of transaction activity is expected in the Mobility space. Niche ventures which allow consumer facing companies to make their back-end more efficient or add value to buyers/ sellers should attract investor’s attention. Emerging categories such as cab aggregators, financial products distribution, innovative travel solutions and other new categories, having consumption as an underlying theme will also garner investor interest.
Aurum believes there will be increased M&A activity, with consolidation picking up pace this year. Larger companies will aggressively scout for companies that can offer them opportunities to outdo competitors or boost growth. Companies offering related services such as loyalty programs, payment gateways, logistics, customer analytics etc. are expected to catch attention of larger players and get acquired. Also horizontal e- commerce players are expected to plug their portfolio specific gaps through acquisitions.
5Private and Confidential For limited circulation only
Date Company Investors Amount
26/12/2014 Policy Bazaar
PremjiInvest, Tiger Global Management
LLC, Inventus Capital Fund II, Iconiq
22/12/2014 Flipkart Online Services
Tiger Global Management LLC, Qatar
Investment Authority, GIC Singapore, DST
GLOBAL,T. Rowe Price Associates,
Steadview Capital, Baillie Gifford,
Greenoaks Capital, Iconiq Capital
Qualcomm Ventures, Helion Advisors
Private Limited, SoftBank Corp, DST
GLOBAL, Nexus Venture Partner, Falcon
26/11/2014 PayMate India Private
Limited Lightbox Ventures I 30
19/11/2014 Zomato Media Private
Sequoia Capital India, Info Edge (India)
Limited, Vy Capital 60
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
27/10/2014 Olacabs SoftBank Corp 210
Canaan Partners, Warburg Pincus
International, Tiger Global Management
25/9/2014 Commonfloor Tiger Global Management LLC 30
Select Fund Raising Transactions – 2014
6Private and Confidential For limited circulation only
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
Inventus Advisory Service (I) Pvt. Ltd, Accel
Partners, Kalaari Capital Advisors Private
12/9/2014 BigBasket Ascent Capital, Zodius Capital, Lionrock
Capital, Helion Venture Partners LLC 33
27/8/2014 Zoomin Online India
First Round Capital, Lightbox Ventures,
Gund Investments 8
Helion Venture Fund II, Bessemer Venture
Partners, Helion Advisors Private Limited,
12/8/2014 Foodpanda Rocket Internet 60
24/7/2014 Flipkart Online Services
T. Rowe Price International Inc, Tiger
Global Management LLC, Accel Partners,
Naspers, GIC, DST GLOBAL, Morgan
16/7/2014 Urban Ladder Home Decor