has grown at a compounded annual growth rate of 30% since FY09, and is expected to be $18 billion (around Rs 1,116,00 crore) opportunity by FY15.
The findings part of report: Indian Ecommerce-Tip of the Iceberg, by Macquire Equities Research back this high growth rate on rising internet population, over 300 million middle class population, increasing mobile penetration and low levels of e-commerce
“Compared to the west, India’s ecommerce industry is still in its infancy. E-commerce
contributes only 0.6% of the country’s GDP vs 1-3% for other countries, with only 12% of India’s online population transacting online vs 64% for the US and over 50% for China,” said Atul Soni and Nitin Mohta in the report.
This growth will further be accentuated by companies
going in for public listing. In the Indian context, only two internet-based companies
are listed on the markets, including Infoedge, which runs India’s largest job portal (naukri.com), and justdial, which is India’s largest local search site.
“In our conversations with various founders and top management leaders in Indian e-commerce
companies, we got a sense that most companies
would be hitting relevant milestones with regards to revenues and profitability in 12-24 months’ time frame. This should clear the way for multiple IPOs from this segment,” said the report.
The nature of Indian e-commerce
is also different. Travel has the lion’s share of 71% of Indian e-commerce, but e-tailing has grown the fastest, at a 59% CAGR
between FY09-13E, to reach 16% market share.
Compared to the west, India’s e-commerce
industry is still in its infancy, but we believe that it may become a bigger part of the entire retail universe than in the west. Internet companies
tend to trade at high multiples of 20x-50x 1 year forward earnings due to the very nature of high growth estimates in comparison to traditional brick and mortar businesses.
“We believe that for many young Indians, online shopping
may become their primary way to shop throughout their lives. Whenever significant opportunities such as e-commerce
present themselves, many market participants compete aggressively to try to emerge as undisputed leaders to gain brand recognition and customer loyalty, and oftentimes these players change their business models along the way to grow with the market,” said the report.