Valuations of e-commerce firms in India seem to be rising quickly, especially after the pandemic, with leading players expected to attract about $12 billion in funding over the next four years, industry players said.
A recent Indian Private Equity and Venture Capital Organisation-EY report also indicated that the pandemic had accelerated the adoption of e-commerce deliveries by consumers, resulting in an increase in the valuations of online direct-to-consumer businesses in the country.
“The sector had recorded $3.7 billion in PE/VC investments in the four months of 2021 compared with the $2.8 billion recorded through the full-year 2020,” an EY official had said.
“The pandemic clearly turned out to be an enabler in valuation increase for e-commerce companies,” said Ankur Bansal, co-founder and director, BlackSoil Capital, an alternate credit platform. “It pushed adoption [and] acceptance, bringing unprecedented growth in the sector in the last 12 months,” he added.
“Long and multiple lockdowns have led to a significant change in consumer habits and brought in a number of first-time buyers and sellers on e-commerce platforms. This will lead to a huge jump in valuation,” he said.
The pandemic-triggered digital acceleration offered better utilisation, revenues and retention for e-commerce businesses,” said Pranav Pai, founding partner, 3one4 Capital.
“The leaders in e-com will now be able to use this acceleration in demand to support the case for a large amount in their next [fund]raise, with better valuation,” he opined.
The current pandemic has brought in significant validation for the e-commerce sector, according to Abhishek Agarwal, managing partner, Rockstud Capital.
“I believe that this boom that we see in India, is structural in nature and similar validations are seen in bigger markets like the U.S. and China. Since 2014, Indian e-com ventures have attracted $13 billion in funds and I expect another $12 billion to come in, in 4 years from now,” he added.
Word of caution
Venkatraman Balakrishnan partner and chairman at Exfinity Venture Partners pointed out the flip side to the pandemic - risk for investors
“Covid put India under the ‘risk’ category for global investors,” he said.
“It is true that there is huge traction in e-commerce both in terms of funding and valuation. But there should not be distortions in valuations,” cautioned the former CFO, Infosys. “Private valuation has to be justified in the public market and it is encouraging that some Indian e-com players are expected to go public soon,’’ he added.
