Amazon India entry has raised consolidation pace in eCom: study

Technopak report foresees M&As between firms with same investors, says larger firms could acquire specialty players

Entry of e-commerce giant Amazon in the Indian market in June last year has not only spurred heightened competition, but has also increased the pace of consolidation in the $2.3 billion e-tailing market, a report said.

According to report by consulting firm Technopak, the sector could witness mergers or acquisitions between firms with same investors, while niche and specialty players could be acquired by larger firms.

The report says that Amazon's entry in the e-commerce market is a development worth noting.

"The global leader is expected to vie for the top slot in India as well, which has triggered an increased urgency and competitiveness within the sector.

"As a result, there has been a significant increase in the investments that are being injected as well as the speed of consolidation," it said in a report.

According the report by the firm, although Indian online retail (e-tailing) market is still a small contributor to retail, accounting for only 0.4 per cent of the overall market, it is on a rapid growth trajectory.

The $2.3 billion e-tailing market in 2014 is expected to reach 3 per cent of Indian retail ($32 billion by 2020).

"Going forward, the consolidation process will continue. Players sharing common investors will increasingly look at mergers/acquisitions, while niche and specialty players possessing unique positioning, assets or capabilities will attract acquisition by the bigger players," Technopak said.

In May this year, marking the biggest consolidation in the e-commerce space in India, homegrown e-retailer Flipkart acquired online fashion retailer Myntra in an estimated Rs 2,000 crore deal.

Technopak said that investors have reaffirmed their faith in this sector by continuing to invest large amount of capital as a result of which an entirely new sector has emerged.

"Indian e-commerce (of which e-tailing is a part) has attracted a total funding of $1.6 billion across over 140 deals since 2012," the report said.

As of May 2014, the sector witnessed 20 deals worth $637 million compared to 60 deals worth $592 million in the entire 2013. In 2012 the sector saw investors pouring in $371 million for a total of 73 deals.