E-marketplaces projected to see enterprise value zoom over 3 times

Digital marketplaces are projected to see their enterprise value more than double or triple and their contribution to gross domestic product to go up from 2-3 per cent currently to 5 per cent by 2027, according to a report released by Accel, jointly with Bain & Company.  

The report projects that the enterprise value of the companies would go up from $150-200 billion currently to $500 billion by 2027.  

Enterprise value refers to the value of a firm based on its last round of fundraise, and is used by unlisted companies as a proxy for market cap.

The report Rise of Digital Bazaars in India points out that marketplaces have a current gross merchandise value (GMV) of $100 billion which is expected to hit $350 billion in 2027. There are two marketplaces having a GMV of over $10 billion, and 15-20 of them have a GMV ranging from $1 billion to $10 billion.   

But there are also areas of concern, such as the sharp slowdown of funding in 2022, which fell by one third over the previous year. In calendar year 2021 till October, investors had put in a record $14 billion ($16 billion for the full year) in these companies, but in 2022 it has gone down to a mere $4.5 billion in the same period.

The deal value multiple across segments has fallen by 0.2x to 0.8x over 2021 across horizontal e-commerce, educational technology, automobile platforms, B2B commerce, and financial technology, among others.   The report says that the key reason for the slowdown has been ‘the tempering of 2021 highs, valuation corrections and muted sentiments in the global public markets’.

But this could be a temporary blip because the 2022 numbers for deal values are better than in 2018.

The report estimates that online shoppers in the next five years will double from today’s 200-230 million to 400-450 million in 2027 and the number of MSMEs buying and selling online will move up from 6 million to 15 million.

The number of jobs created by these companies will also more than double from 3 million to 7 million in the same period.