e-commerce industry analysis

ITM - EMBA (Finance) - Batch 34

Bottom-up Approach

THE RISE & RISE OF E-COMMERCE -SECTOR OVERVIEWSPECIFIC RECOMMENDATIONS


Table of Contents

E-commerce sector in India Evolution Types Holistic Graphs Key Drivers of Growth Global Scenario SWOT of the sector

Info Edge Just Dial


Evolution of E-commerce Business

Launch of internet in

India dialup in 6 cities

Launch of online job

portals

Launch of online B2B

portals Launch of online

matrimonial sites

Muted activity in the industry

due to the dotcom bubble bust in 2000

Launch of online agents (OTA)

Launch of first group

buying website in

IndiaNew trend of

use networking sites as a marketing

toll begins or the advent

of social commerce

Entry of a number of

players in e-tailing segment

Aug 1995

19961997 2000 2005

2006

20072010

1st Wave (1996-2000) 2nd Wave (2006- present)


Types of E-commerce transaction


A Holistic View

THENInternet user base close to 5.5m in 2006

Average time spent online by an Indian consumer per month 2.6 hrs in 2006

No 3G spectrum auction in India till 2010

Number of credit card and debit card in India 4.2m and 0.3m respectively in 1999

Number of broadband subscribers as low as 51,000 in 2001

Number of users transacting online 3 million in 2007

NOWInternet user base close increased to 300m

Average time spent online by an Indian consumer per month 21 hrs in 2015

3G subscribes to reached 118m in 2014 and 303.4m by 2020

Number of credit card and debit card in India 73.7m and 350m respectively in 2014

Number of broadband subscribers reached 100m by 2014 and more then 300m by 2020

Number of users transacting online 38 million in 2014


Graphs reveal all………

Break-up of Indian E-Commerce Industry

Online Buyers as % of internet users


Graphs reveal all………

E-commerce Industry in early stages in India…….

E-Commerce Industry as % of country’s GDP (2013)


Key Drivers of growth in Indian E-Commerce Sector

Increased Internet Usage

• Number of Internet users to crossed USA• Rural areas showing 58% CAGR growth rate for internet adoption

Favorable Demographics 300m middle

class

• Rapidly growing middle class• Rising levels of urbanization

Increased Mobile

penetration

• Mobile users have higher frequency of access• Urban users contributing lion’s share of Indian mobile users• Mobile internet users have grown by 2.7x in the last 18 months


Key Drivers of growth in Indian E-Commerce Sector

Better accessibility to

Internet

• Due to new technological development users have faster access to internet• Data rates have come down internet usage is affordable

Hardware accessibility

• Cost of PC’s, laptop and other hardware devices have become reasonable • Single largest contributor to the success of E-Commerce is affordable android devices

Safe Payment Gateway

• Safe payment gateways give confidence and assurance to internet shoppers • There are several payment options to choose from• Cash on delivery is an instant hit with the Indian online shoppers


SWOT Analysis of the SectorStrengths• Less Capital Intensive• Venture capital willing to fund, less debt burden of these co’s• Different models of business is already tried and refined in the west

Opportunities• Job creation• Scope for overall infrastructure development • Tier I – Tier II cities are untouched• Head room for growth due to favorable demographics• Growth directly related to spending power which is increasing

Weakness• No entry barriers• Fierce competition • Margins are thin• Allied sector not very well developed• Bargaining power of firms is less• Overdependence on technology• These co’s trade at high multiples

Threats•Change in government rules, currently no specific rules for this space• Fragmented too many players• Threat of substitute / new entrants• Scope for misuse of confidential information• Threat of takeover is high


INFO EDGE

Company Profile• The Company was incorporated on May 1, 1995 under the Companies Act, •1956 as Info Edge (India) Private Limited. and converted into a Public Limited on •April 27, 2006.• Info Edge is largely known for its recruitment portal Naukri.com in India. It was •the first listed internet-based player on Indian bourses.Executive SummarySanjeev Bikhchandani, Founder and Executive Vice Chairman – Founded the company in 1995 and previously worked with Lintas and GSK.Hitesh Oberoi, Managing Director and CEO – Joined the company in 2000 and has worked with HLL previously.Ambarish Raghuvanshi, CFO. Joined the company in 2000 and has worked with Bank of America and HSBC previously.

Particulars

Data

CMP 800.50

Mkt Cap 5348.72 CR

52 Week High – Low

1015 – 523.70

Face Value Rs. 10

Traded Volume (shs)

91,111

Ticker BSE532777

Ticker NSENAUKRI

50%

29%

11%0.27%

5% 4%

Shareholders as on 31 March 2014

Promoters

FII

MF & UTI

Corporate Bodies

Indian Public In-dividuals

Others

Promoters continue to hold 51%

Major shareholder is HDFC MF which holds close to 7%.

Other prominent shareholders include funds like T.Rowe Price, SBI MF & Mathews India


Info Edge

Recruitment (Naukri)

Real Estate (99acres)

Matrimony (jeevansaathi)

Education (shiksha)

Business Verticals

INFO EDGE

74%

7%

15%4%

Revenue Mix

RecruitmentMatrimonyReal EstateEducation and others

Hit 52 week high on 24 Nov 2014 on the hopes of higher valuation of 99 Acres ( 24 Nov 2014)

Less than expected full year results ( 8

May 2014)


INFO EDGE

Strengths•First mover advantage in various categories•Recruitments, contributing ~77% of company revenues, is ~50% EBITDA margin business•No debt and cash generating business

Weaknesses• Low barriers to entry• Failure to adapt to newer technological shifts• Competition• Over dependence on one segmentOpportunities

• Rising internet penetration• Improving macroeconomic conditions• Strong growth in Mobile platform.

Threats• Technological obsolence• Competing products from new or existing players


INFO EDGE

PAT to Sales

Debt to Equity Ratio

Cost Break-up

Series10

500

1000

1500

2000

2500

3000

3500

13701672

1968

516

577

662442

626

761

Advertising and promotion cost

Employee benefit expense

Series1

2012

2013

2014

2012 2013 20140

1000

2000

3000

4000

5000

6000

37714372

5059

SalesPAT

2012 2013 20141300

1350

1400

1450

1500

1550

1600

1650

1700

1442

1498

1668

EBITDA

EBITDA

2012 2013 20140

200

400

600

800

1000

1200

546

1092 1092

2.8 4.8 4.4

Equity (INR in Mil-lion)


Company ProfileJust Dial is a “local” search engine company in India, incorporated in 1993 as A&M communications by Mr. V.S.S Mani. It started offering local search services in 1996 under the Just Dial brand. Just Dial's search service is available to users across multiple platforms, such as the internet, mobile Internet, over the telephone (voice) and text (SMS)

Just Dial is the largest online classifieds player in India with 15million listingsand 45million reviews. The company IPOed in June’13; it was listed atRs.530

Management and Directors’ background Mr. V.S.S. Mani, Managing Director – Founder and an industry veteran with over 25 yrs of experience in media and local search services.Mr. V. Krishnan, Executive Director– Co-Founder and has over 20 yrs of experience in strategic planning and execution.Mr. Sandipan Chattopadhyay, CTO. Over 16yrs of experience in technology services and been with Just Dial since 2009.Mr. Ramkumar Krishnamachari, CFO. Over 22yrs of experience in finance and accounting

Particulars Data

CMP 1322.05

Mkt Cap (crs)

3390.73

52 Week High – Low

1894 - 982

Face Value Rs. 10

Traded Volume (shs)

348032

Ticker BSE535648

Ticker NSEJUSTDIAL

Justdial


32.89%

27.38%

4.71%

35.02%

Shareholding pattern

Promoters

FII

DII

Non institu-tions/Public

Top Shareholders:• Tiger Global• SAIF II Mauritius• Sequoia capital

Justdial

Board nod for hiking FII holding limit (5 Aug 2014)

The sharp selloff in Just Dial has come amid fears of redemption by pre-IPO investors, whose lock-in period expires on June 5, 2014. This could put a large number of shares in the open market (6 May 2014).


Strengths• First mover

advantage in the category.

• Profitable business model,

• No debt and cash generating business.

• Access through multiple platforms.

Weaknesses• Low barriers to

entry• Potential failure

to adapt to newer technological shifts

Opportunities• Strong growth and increased penetration rate in the Mobile platform are the biggest opportunities for the company.

Threats• Technological obsolence.

• Competing product from new or existing players

Justdial


PAT to Sales

Debt to Equity Ratio

Price to Earning (PE)

Justdial

2012 2013 20140

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

2621

3628

4613

SalesPAT

2012 2013 20140

200

400

600

800

1000

1200

1400

1600

672

1008

1422

EBITDA

EBITDA

2012 2013 20140

100

200

300

400

500

600

700

800

531

695 702

0 0 0

Equity (INR in Million)Debt (INR in Million)

2012 2013 2014

158148

87


Key Ratios

Particulars INFO EDGE Justdial

EBIDTA Margin 33.0 30.8

PE 74.4 78.5

EV/EBIDTA 48.4 61.9

ROE 18.4 25

EV/Sales 16 19.1

EPS (RS) 11.77 17.43

Debt/Equity 0.41 0

Recommendation

HOLD ACCUMULATE


Summarization


Thank You

Rinki Haldar – 14Theresa Tumkur - 100Shital Pawar - 105Prashant Mirgule - 53Karunakar Niwate – 52Shahezad Sakharkar

Group Members

e-commerce industry analysis

Documents

number of users

internet shoppers

success of ecommerce

internet data rates

number of credit card

indian consumer

number of players

online b2b portals