india internet penetration

8/8/2019 India Internet Penetration

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CONFIDENTIAL

Internet Penetration in India

Zinnov LLC

July, 2006

This report is solely for the use of Zinnov client and Zinnov personnel. Nopart of it may be circulated, quoted, or reproduced for distribution outsidethe client organization without prior written approval from Zinnov LLC.


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AGENDA

Focus of Discussion

Internet Penetration in India and E-Commerce

Zinnov Research Overview


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Internet penetration was low but has seen significant growth

Discussion

Discussion

India is now in the 4th place in termsof Internet users

Percentage penetration is still low buthas increased significantly from 0.1%in 1998 to 4.5% in 2005

The growing popularity of cybercafs

has been playing a big role in fuellingInternet development in India

Low cost of broadband has alsohelped increase Internet usage

E-commerce and high demand for .indomain registrations are also factors

for the increase in online users. The".in" domain registrations surpassed150,000.

The Internet population is expectedto grow to 100 million by 2007

No. of ISPs grew from 1 in 1995 to189 in 2003

India is now in the 4th place in termsof Internet users

Percentage penetration is still low buthas increased significantly from 0.1%in 1998 to 4.5% in 2005

The growing popularity of cybercafs

has been playing a big role in fuellingInternet development in India

Low cost of broadband has alsohelped increase Internet usage

E-commerce and high demand for .indomain registrations are also factorsfor the increase in online users. The".in" domain registrations surpassed150,000.

The Internet population is expectedto grow to 100 million by 2007

No. of ISPs grew from 1 in 1995 to189 in 2003

Internet Users

1.42.8

5.57

16.5

22.5

39.2

50.6

1998 1999 2000 2001 2002 2003 2004 2005

Millions

Source: Internet World Stats, Web Search, Industry Associations


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3

Low cost of broadband has triggered growth in broadband subscriber

base

2028

45

78.3

145.6

288.4

2001 2002 2003 2004 2005 2006

000s

Total Broadband subscribers

Discussion

Discussion

Broadband policy and other initiativesby the IT and Telecom Ministryencourage increased adoption.

A monthly broadband subscription

costs as little as 199 rupees (US$4.50). A second factor is the IT Telecom

Ministry initiative to make computersavailable for purchase under 10,000rupees (US $226).

Today broadband usage in India isgrowing at 20% per month

Broadband policy and other initiativesby the IT and Telecom Ministryencourage increased adoption.

A monthly broadband subscription

costs as little as 199 rupees (US$4.50). A second factor is the IT Telecom

Ministry initiative to make computersavailable for purchase under 10,000rupees (US $226).

Today broadband usage in India is

growing at 20% per month

Source: Industry News and Reports, Zinnov Analysis


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E-commerce is considered as the next big thing that will drive internet

usage growth

E-commerce Revenues

Years

124

257

500

0

100

200

300

400

500

600

2004-05 2005-06 2006-07

MillionDollars

Source: Internet & Online Association of India, Industry News, Zinnov Analysis

CAGR103%

Discussion

Discussion

From a business perspective it offersunlimited shelf space, it isn't bound byoperational timings and geographicalboundaries and an opportunity tocater to country wide city markets (forconsumers and suppliers alike) at acomparative miniscule cost

From a consumers perspective itallows greater access (hence the highresponse rate by tier 2 cities) to

markets and an opportunity to makeinformed decisions on purchases.

From a business perspective it offersunlimited shelf space, it isn't bound byoperational timings and geographicalboundaries and an opportunity to

cater to country wide city markets (forconsumers and suppliers alike) at acomparative miniscule cost

From a consumers perspective itallows greater access (hence the highresponse rate by tier 2 cities) to

markets and an opportunity to makeinformed decisions on purchases.


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driven by growing number of credit cards, good online shopping places,

ticketing websites and the way banking is done today

DiscussionDiscussion

Internet & Mobile Association of Indiafindings show the most popular onlineactivities undertaken by Internet usersin India in 2005 (as a % ofrespondents):

E-mail and IM: 98% Job search: 51% Banking: 32% Bill payment: 18% Stock trading: 15%

Matrimonial search: 15%

Internet & Mobile Association of Indiafindings show the most popular onlineactivities undertaken by Internet usersin India in 2005 (as a % of

respondents): E-mail and IM: 98% Job search: 51% Banking: 32% Bill payment: 18% Stock trading: 15%

Matrimonial search: 15%

The number of credit cards in Indian hasshot up from 6.5 mn in 2002 to 9 mn in

2003. Consultancy firm McKinsey recentlyreckoned that Indians will be using 35

million cards by 2010

IRCTC which is a railwayticket booking website

issues out 196,000 ticketsgenerating $6.3 mn asrevenues every month

Online shoppers like 'Home delivery' aboutonline shopping, and 'Time saving', also

'24x7 thing, they also like the 'Ease of use'and product comparisons features

Source: Zinnov Analysis, Industry News, Internet & Online Association of India, Web Search

e-commerce activitieswithin India has exceeded

USD 125 million during2004-05.


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E-Commerce is benefiting by a pull from customers and push from

investors

Customer Pull Business Push

Insistence by large businessesthat all their clients/vendors link toe-commerce

Defensive reaction to competitors-Herd mentality followed by thecompanies

Reduction in transaction cost andbetter product quality There is

an overall maturity in the deliverycycle (payment sites, frauddetection and delivery) which hasfurther enhanced the growth.

Home delivery of goods havemade e-commerce a favoritewith e-citizens especially e-tickets and gifts

Time saving- ticket booking,

online selections save time

Ease of use -Ordering from thecomfort of home/office.

No geographical limits- sittingin India you can order goods

from US/Europe Best offer- easy EMIs (equated

monthly installments) andpayment on delivery

Source: Zinnov Analysis, Industry News, Web Search


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E-Commerce in India has seen a lot of action in the Employment, Travel,

Matrimonial and e-learning arena recently

The Company is an online

recruitment and placementwebsite.

The company has nearly 15,000companies to which it plays host, forit Human resources needs (eg.Oracle, AMD,Lehman Brothers etc.)

They have US$ 10 million fundingform KPCB, Sherpalo

TravelGuru.com

Travelguru is a travel website,offering travel related packagesacross India and the world

It provides as a one stop shop formost travel related needs

It have received funding fromSequoia Capital India, a VCformed by merger of West BridgePartners and Sequoia capital

Yatra.inNaukri.com

Yatra provides travel-relatedinformation, pricing, availabilityand reservations etc. rentalsacross 5000 large cities andsmall rural areas throughoutIndia

It has received venture capitalfunding worth US$ 5 million formReliance capital, Norwest VC,

TV18

24x7learning.comShaadi.com

Shaadi.com is dedicated toproviding with the ultimate lifepartner search experience

The website has got funding fromVC called WestBridge worthUS$8 million

It is an specializes in helpingorganizations successfullyimplement their learninginitiatives

which raised $10 million fromventure fund Angel Investors andKITVEN

MakeMyTrip providescomprehensive services for theleisure and small-businesstraveler, backed by real-timebooking ability

It has received funding fromSoftbank worth US$ 10 million and

owns 50% of shareholding

Makemytrip.com

Source: Websites, ET market estimates


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Online Travel Booking is the killer e-commerce application in India

100% = US$ 75 million of funding by VCs

Employment,

16%

Matrimonial,

11%

E learning,

13%

Others, 23%

Travel , 37%

DriversDrivers

The Indian economy have seen aconsistent growth of 7- 8 % per annum inrecent years, which has resulted into Growing Middle Class incomes Consumer spending increase in

leisure items and services likeentertainment, Vacation etc.

Indian consumers tend to spend10.4% on vacation related activities

Growing army of credit card holdersand internet users are opting to bookair tickets online

Discounts and freebies by onlineticket booking sites

The Indian economy have seen aconsistent growth of 7- 8 % per annum inrecent years, which has resulted into

Growing Middle Class incomes Consumer spending increase in

leisure items and services likeentertainment, Vacation etc.

Indian consumers tend to spend10.4% on vacation related activities

Growing army of credit card holdersand internet users are opting to bookair tickets online

Discounts and freebies by onlineticket booking sites

* Data is for investment in the year 2005-06Source:contentsutra.com; KPMG Consumer Market India report


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E-governance and finance services along with insurance and health

services will be the next big thing in e-commerce

E-GovernanceTaxes, duties etc.

Futureof e-commerce

Financial & Banking

Online Trading,Remittances to India

Insurance

Online premiums

Health SectorOnline medical bill

settlement



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E-Commerce faces many challenges in India Infrastructure and

traditional mind setup are two big ones

India lags behind in speed and cost of internet when compared to othermajor Asian countries.

India also lags in internet penetration, where most of the people accessinternet for long hours only from their offices

Lack of credit card availability limits the potential customers

Infrastructure

Indian customers because of the traditional mind setup believe in touch andfeel factor and hence are not taking online shopping in a big way

Lack of a proper channel to settle the payment disputes is a major factor

Indian Government still has problems with 'Digital signatures' and verification

processes over the Internet

Mindset andSecurity



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Globally experts feel that this Dotcom boom is not like the earlier bubble

era and India should not be any different

Sunk costsSunk costs

Hardware andsoftware CostHardware andsoftware Cost

Initial investmentInitial investment

Technologies that are

benefiting from profligate'90s-era investment and

research.

New BoomNew Boom

Open source software and

hosting services meancomputer h/w and s/w will

soon cost less

You can start a

company today for a tinyfraction of what peoplespent five years ago

Bubble EraBubble Era

Companies bankruptedthemselves building out their

fiber-optic networks andinvestment in technologies

Were very high

High

Venture CapitalVenture Capital

Today companies arestarting small and leanand staying that way.They're hitting break-even sooner and dontdepend on VC funding

Blowing all the first-round funding on PR

stunts and rooftopparties


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AGENDA

Focus of Discussion

Internet Penetration in India and E-Commerce

Zinnov Research Overview


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Zinnov About us

We are a knowledgeservices and consultingcompany with offices bothin US and in India.

We help our clients reduce

the time, money and risksinvolved in organizationalinitiatives usingcombination of consultingand knowledge solutions

delivered by global teams.

Market ResearchCompany Overview Knowledge Services

Dedicated KnowledgeCenters (DKCs):

We provide dedicated teams thathelp our customers in the areas ofmarket research, competitoranalysis, business research, data

analytics and pre-sales support.DKCs act as an augmentation toour customer teams and providecost effective and high valueservices.

We have provided our research

and consulting solutions to morethan two dozen customers. Today,our client roster included reputedNASDAQ listed companies, smallto medium sized independentsoftware vendors, strategyconsulting firms and other large

enterprises in domains such asBFSI, IT services andInfrastructure management.

Research services Customized market studies

Competitive Benchmarking

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Market Intelligence

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Help companies enter the Indiamarket by helping them scopeand segment the market,provide on-ground sales and

marketing support to tap into thelocal market.


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Zinnov research team can help clients with market intelligence, competitor

analysis and go-to-market strategy

Zinnov

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Untapped or under-tapped potential customers profiling Target customer evaluation and analysis

Go-to-marketstrategy

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Competitor information (processes, clients etc.) Competitive analysis (company profiles, market shares,

product comparisons, benchmarking) Pricing analysis Customer/competitor financials


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A. Market Research: Zinnov has a very strong Market Research Capability

with expertise across the value chain, specifically in the high end spaceIllustrative

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Analytics

CompetitiveBenchmarkingCustomized

Market StudiesGrowthForecast

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Experience

and

Expe

rtise

Rich experience withHigh end marketresearch enablingstrategic decisionssuch as go-to-market

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Zinnovs Differentiators

Level of Complexity


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B. Financial Analysis: Zinnov has a strong Financial Analysis Capability

which complements both market and business research

Balance Sheet

IncomeStatement

Cash Flow

Statement

FinancialStatements

RatioAnalysis

Profitability ratios Turnover ratios

Liquidity ratios Solvency ratios

Returns - Return onequity; Return onAssets, etc.

Margins - GrossMargin; Net Margin

Total Asset turnover

Fixed asset turnover

Working capital

turnover Inventory turnover

Current ratio

Quick ratio

Cash ratio

Debt to equity

Debt to total capital

Interest Coverage Total Coverage

Share Price Market Value

of Equity

EnterpriseValue

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Valuation

MultipleAnalysis

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D. Business Research: Zinnov has a strong Business Research Capability

as well, covering various facets of business

BusinessResearch

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E. Market Mapping Competitive Mapping and Benchmarking

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Practices

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Our clients are benefited by cost and time effective research that Zinnov

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Customized MarketIntelligence

Increased focus oncore-competencies for

Client

Competitoranalysis -

customizedresearch &

analysis

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strategy toenter newmarkets

Higher Client Impactat lesser cost


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Thank You !

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