Online sports retailer to dilute 25% equity

Playground Sports Pvt Ltd is looking at diluting upto 25 per cent equity in the Internet sports start-up to a strategic investor to fund its expansion plans and launch operations in new areas.

Besides scaling up to consolidate its position in the e-commerce space, Playground Sports plans to launch operations in areas like direct sales, tech services and retail. "We are looking to tap investments of Rs 5 crore primarily from angel investors and others who understand the business," co-founder and director Ramakrishna Kalluri said.

The introduction of new service lines are expected to open up new avenues for revenue generation. "Once we consolidate our online operations, we will look at expanding our sales program to schools, corporates and sports academies which generate a considerable part of the demand," according to Kalluri, a 16-year veteran with software giant Infosys Technologies.

Playground's products and services are offered through a combination of B2C and B2B channels delivered both online and offline. "We expect IRR (Internal Rate of Return) for the investor to translate to 4-5 times the initial investment over a 3-year investment horizon," Kalluri said.

The company has also been in talks with large retail companies for co-branding possibilities. On the likelihood of the company's merging with a larger player in the online or offline retail space, Kalluri said that this would be a possibility once the first phase of growth is completed.

The portal was incubated in 2007 with a capital infusion of Rs 1 crore to meet the demand for sports goods. "We have had the first mover advantage in ensuring that sports equipment and accessories are no longer confined to retail outlets in select cities. Our expansion is targeted at taking sports merchandise to the smaller towns," Kalluri said.

"In the second phase, we want to grow our offline retail presence," Kalluri said. Playground has seen a conversion rate of close to 1 per cent (1 order placed for every 100 clicks) against the worldwide standard of 1.5 per cent.

A Tech Crunchies report projects e-commerce sales to reach $5.6 billion by 2011 from $2.8 billion currently.