Research Report On Ecom

Thematic | November 2014
E-commerce
Fast and furious
Ashish Chopra (Ashish.Chopra@MotilalOswal.com); +91 22 3982 5424

Siddharth Vora (Siddharth.Vora@MotilalOswal.com); +91 22 3982 5585
Thematic | E-commerce
INDEX: Fast and furious; Just the beginning of multi-year explosive growth
SUMMARY
STORY IN CHARTS
SECTION-1
SECTION-II
SECTION-III
SECTION-IV
SECTION-V
CLASSIFIEDS
3
7
E-commerce in India set to explode
Size of India's e-commerce market to reach USD20b by 2015
Growth drivers similar to those in China
China's Alibaba makes history
Sizing up Indian e-commerce market
Online Travel
E-tailing
Classifieds
Financial Services
All about share gains
Additional factors challenging profit generation
Competitive forces: Red ocean at large
The conundrum of business model
Why Snapdeals marketplace and strategy will likely work
Jabong Key player in the fashion e-tailing segment
Allied industries stand to benefit in equal measure
Online coupons / discount marketing
Digital advertising
Logistics, warehouses and payment gateways
Companies
Info Edge - Initiating coverage with a buy
Just Dial - Company Update
COMPANY PROFILES:
E-TAIL
Flipkart, Jabong, Snapdeal, Shopclues, Infibeam, Myntra, Fashion And
You, Zivame, Healthkart, Bigbasket, Bluestone, UrbanLadder
TRAVEL
MakeMyTrip, Yatra
CLASSIFIEDS
Bharat Matrimony, People Group, Zomato, Quikr
ALLIED/ECOSYSTEM Mydala, Pay Point India, DTDC, PAYU, Hungama
APPENDIX
EXPERT SPEAK
Mr Rajan Anandan, Head Google India
Mr Nitin Bawankule, Industry Director Google India
Mr Kunal Bahl Co-founder and CEO, Snapdeal
Mr Sanjiv Kathuria, Director & CEO, DotZot
Mr Nitin Gupta, Co-founder and CEO, PayU India
November 2014
19
30
39
46
59
69
73
88
90
94
100
6
27
40
54
57
Thematic || E-commerce
E-commerce
Thematic
E-commerce
Fast and furious
Just the beginning of multi-year explosive growth
Online shopping of physical goods alone in India is estimated to reach USD4b in 2014,
and multiply by over 11x to USD45b by 2020 that is CAGR of 50%.
Indian Retail is ~USD600b, of which only 0.3% was online sales in 2013. Even as a % of
Organized Retail, online sales are <4%.
In China, E-tailing grew at a CAGR of 76% over CY08-CY13 to USD306b, and is expected
to grow at a CAGR of 31% till 2017, to a staggering USD893b. The drivers
demography, internet user base, smartphones, physical retail limitations.
Indias 213m strong internet population as on 2013 is seeing 5m additions every

month, driven by the rapid growth in Smartphones. Drivers are identical.
The wave of online shopping will also drive other industries like logistics,
warehousing, coupons and payment gateways. Among other winners, we see
following players with strong edge Snapdeal.com, Jabong.com, Mydala.com, DotZot.
This is just the beginning
Source: Mysay.in
Summarizing competition
We watch our competitors, learn from them. See the things that they were
doing for customers and copy those things as much as we can. Jeff Bezoz,
Founder and CEO, Amazon
You should learn from your competitor, but never copy. Copy and you die.
Jack Ma, Executive Chairman, Alibaba Group
Summarizing latency
November 2014
Some will call us a success and we are worth billions (because of this fundraise).
And, of course, there are some who will call it a bubble. We know that raising
money is not success. It is a responsibility that opens up new opportunities.
Jason Goldberg, Founder, Fab.com
In the future, instead of buying bananas, you could go pick them off a tree in a
virtual jungle. Yasuhiro Fukushima, Honorary Chairman, Square Enix
3
Online Retail penetration (%)

10.0
10.0
Korea
US
6.0
0.3
India
China
Capital + Ecosystem + Small base Soaring growth over multiple years

Expect ~30% CAGR over 2013-20: E-commerce in India is a ~USD11b market, and is
estimated to reach USD20b by 2015, growing at a CAGR of ~37% over 2013-15.
Google estimates this to further propel to USD70b by 2020 (30% CAGR), of which etailing (online shopping of physical goods), which is only ~USD2b in size today, will
grow to become a USD45b industry.
On a low base, multiple enablers of this explosive growth include: (1) Increase in the
number of internet users (5m being added every month to the base of 213m in
2013), (2) Increase in the proportion of online shoppers within those users, (3)
Growth in the per-shopper transaction value, and (4) Continued flow of capital by
willing investors, arming firms with ammunition to woo consumers online.
Huge money fuelling rapid growth, getting invested across the value chain
~USD1.75b
Pricing discounts
~USD2b
commitment
Branding / Marketing
~USD300m
Technology platform
USD110m+
Logistics / Other
infrastructure
India's Digital commerce (USD b)
9.7
13.0
18.2
24.8
CY12
CY13
CY14E
CY15E
INVESTMENTS
Source: MOSL
E-commerce market (USD b)

260
295
US
China
13
India
Drivers of growth are similar to those in China, the biggest global e-tailing market:
Chinas e-commerce market today is estimated to be at par with or even slightly
ahead of the US. It reached its inflection point in 2005, when the size was similar to
Indias current e-tail market. Also, the key enablers for ~120% CAGR since 2003
were very similar to the Indian market: (1) increasing broadband penetration, (2)
acceptance of marketplaces, and (3) lack of offline retail infrastructure in many
regions. Cash-on-delivery (COD) has gained popularity as a mode of payment.
Travel dominates Indian market, but e-tailing will drive future growth
Online travel constituted ~71% of the e-commerce market in India, followed by etailing (16%). Travel has grown at a CAGR of 32% over 2009-13. However, going
forward, e-tailing will be the biggest growth driver, with expected CAGR of 60%+ to
USD7b in 2016 from USD1.7b in 2013. Within e-tailing, Fashion is likely to be the
driving segment. Fashion was USD559m in 2013, and estimates peg the growth in
Fashion e-tailing to anywhere between USD3b and USD6b by 2016.
Competitive intensity running high; road to profitability long-winded
November 2014
Heavy discount on online sales is a direct reflection of the industrys competitive

intensity. The amount of money raised by Flipkart, lately Snapdeal, and that
committed by Amazon is all yet to be invested, indicating that we may not be
anywhere near the end of round-the-clock discount seasons at online stores.
Leading Indian players are not thinking of profitability just yet, and compeition is
causing all serious participants to have a ready warchest for the splurge which
will happen further, as the industry scales multiple times.
On an average, the e-commerce ecosystems in both China and the US make 810% EBITDA margins (Alibaba is an exception at 40%+). Amazon, the industry
pioneer, is yet to achieve healthy profitability, after two decades of dominance.
Model conundrum: Inventory or marketplace? Single or multi-category?

A marketplace simply provides a platform for sellers to sell their own products. In
inventory-led models, the e-tailer owns the product. Hybrid model is where the
seller sells his own labels and also provides a platform for merchants and sellers to
sell their products. Conflict of interest in hybrid model is that the platform owner
may push his/her own inventory v/s the merchants, given the information edge.
While that is eliminated in the marketplace, controlling product quality is a problem
in the latter. It is not feasible to keep a check on the millions of products.
Why Snapdeals marketplace and strategy will likely work: Snapdeals investment
requirements have been limited given its focus on being the best marketplace. Its
sales have significantly outgrown the industry in FY14, given its focus on adding
more sellers. Through initiatives like Safeship, it has also made noteworthy effort to
overcome product quality uncertainties that pose a challenge to the marketplace
model.
Fashion category GMV (USD m)
2811
278
559
CY12
CY13
CY16E
Room for single-category players in select segments, most prominently, Fashion:

While there could be space for 3-4 horizontal (multi-category) players to co-exist in
the market, we see enough room for category-focused players in segments that
require a differentiated approach. Online Fashion selling requires initiatives and
forays unique to the industry. Jabongs recent merger with four other global entities
in the Fashion category is a potential masterstroke that offers the new entity (GFG)
potential of attracting more brands, large investors and talent, and offering the best
technology platform, thereby gaining clear competitive advantage.
Ensuing opportunity for allied industries Logistics, Payment, Coupons

For every INR100 spent on e-commerce, it is estimated that ~INR35 is spent on
supporting services like Warehousing, Payment Gateways, Logistics, among others.
Supporting services: While 50-60% of the delivery logistics today are handled by
the large e-tailers themselves, this proportion may reduce as the proportion of
sales to lower-tier cities increases and e-tailers focus on bottomline picks up.
Delivery costs a platform owner 8-10%, implying significant burn for firms today.
Segments like Logistics, Warehousing, and Payment Gateways stand to benefit
directly and immensely from digital commerce.
Online coupons / discount marketing is a flourishing global industry, with
multiple USD1b+ value companies in the US, and the Chinese market pegged to
be even bigger. Value proposition to SMBs, especially in lower tier cities, should
drive rapid growth in this segment. Mydala, with its hyper local marketing
platform, reach in over 200 cities and focus on lower-tier cities is best placed.
November 2014
Expert Speak: Mr Rajan Anandan, HeadGoogle India

Product commerce to grow by 10x from 2014 to 2020
Era of connectivity explosion
India is adding ~5m internet

users every month will
overtake US in a year
It took 110 years for the number of land-line consumers to reach 1b, 14 years
for 1b cellular users and 8 years for 1b internet users. The next disruption is
coming from smartphones. One needs to watch out for the future for devices
like Google Glass and Google Watch.
In 2014, there will be ~2.8b people on the internet, with ~1.75b smartphone
users. By 2020, this number will increase to 5b people, and there will be 40-50b
connected devices.
Disruption in India to be brought about by Mobile Internet
India had 213m internet users in 2013, and is currently adding ~5m every
month.
In the next one year, India will be the second largest population on the internet,
greater than the US, and only behind China. China today has 580m internet
users. By 2018, India should have 500m internet.
~50% of the mobile users use internet on their phones. This number will
increase to ~65% by 2015.
India e-tailing to grow 10x by 2020 to USD45b
Capital intensity will be

high, and regulators will
have to be enablers for the
opportunity
Capital intensity will be higher for Indian e-commerce players
November 2014
By the end of 2014, product commerce will be a USD4.5b market in India

(excludes travel). This number is set to increase to USD45b by 2020. Other
segments including travel will add another USD25b. The total size of Indian
Retail is estimated at USD450b.
GMV at Flipkart is USD1.5b-2b. The company is seeing 100,000+ transactions
daily. Total number of transactions of electronic goods at Flipkart exceeds the
cumulative transactions across the top-3 offline electronics retailers in the
country.
India has 47m small businesses with <2% of them having web presence. Today,
50% of the car buyers research online before going to dealers. 70% of urban
teenagers buy online and 69% of users decide which mobile phone to purchase
using online information.
Classifieds a USD350m industry today, set to grow to USD850m in the next 3-4
years. Today, ~100% of the jobs classifieds online, 50% of matrimony classifieds,
10% of Real Estate classifieds, and 10-15% of Education classifieds are online.
The Internet is also a USD8b opportunity for Telcos USD6.2b in media content
and services, USD1.2b in mobile applications, and USD0.4b in e-stores and ecares.
~USD2.5b has been invested in the e-commerce companies in the country
across 54 companies. There will be further USD4b-5b worth of capital needed to
achieve the scale anticipated. However, regulatory measures like FDI in ecommerce are essential to sustain the inflow and fuel growth.
Amazon, the global leader in e-commerce, made no money for the first 10 years
and has been making very little money since. In India, even for marketplace
models, the capital intensity is likely to be higher, mainly due to the limited
infrastructure, requiring investments in the ecosystem like logistics. 25-30% of
the orders have to be rejected today due to no reach in the respective pin
codes.
Story in charts
Exhibit 1: Digital commerce in India scaled to
USD11b in CY13
Source: IAMAI, MOSL
Exhibit 3: Penetration of online medium for

Retail is still miniscule
Source: Industry research, MOSL
Exhibit 5: Drivers for growth will be increase in

internet users
Source: Industry estimates
November 2014
Exhibit 2: but is still well below that at China or US
Source: Industry sources
Exhibit 4: and projected to grow multiple

times in few years time
Exhibit 6: and consequent increase in number of

internet shoppers
Source: Accel estimates
Story in charts
Exhibit 7: E-tailing is expected to be the fastest
growing segment
Exhibit 8: which should be driven by fashion segment
Source: Accel estimates and industry sources
Exhibit 9: Intense competition has already driven multiple acquisitions in the segment
Date
2014 May
Target
Myntra.com
Acquirer
Flipkart
Description
Myntra.com gets acquired by poster boy of Indian e-commerce, Flipkart. The deal
values Myntra reportedly at Rs. 2,000 crores and is a 100% acquisition in cash and
stock. After the acquisition, Myntra will continue to operate as a seperate entity
with the CEO of Myntra heading the fashion business.
2013 June
Redbus.in
Ibibo
redBus.in acquired by Ibibo group backed by Naspers group reportedly for Rs. 800
crores.
2013 February
Inkfruit.com
Zovi
Mumbai based Inkfruit.com (a community based customized fashion and accessories

retailer) was acquired by Bangalore based online fashion retailer Zovi.com.
2012 February
Letsbuy.com
Flipkart
Letsbuy.com got acquired by Flipkart for cash and equity. The Letsbuy team of 350+
was expected to continue to function independently with access to Flipkarts
technology platform and supply chain capabilities.
Source: News Articles, MOSL
Exhibit 10: ..and also aggressive pricing has meant losses
Source: Sequoia Capital, News articles
November 2014
Exhibit 11: Few will emerge as winners in their segments
Source: MOSL
SECTION-I
E-commerce in India set to explode

Indian beginnings suggest similar drivers as in China
Indias USD11b Indian e-commerce market is expected to grow to ~USD20b by 2015

(37% CAGR) and Google expects it to grow to USD70b by 2020 (30% CAGR).
Growth in e-commerce will be led by e-tailing (online shopping for physical goods),
which is projected to grow from ~USD2b to USD7b+ in three years and USD45b by
2020. Within e-tailing, fashion is set to grow the fastest.
Growing internet population, limitations of physical retail beyond large cities, and
well-funded ecosystem players are all drivers. These are similar to those in China,
where e-commerce grew at a CAGR of 76% since 2003 to USD306b.
Just the beginning of solving a core demand-supply need

Retailing is a ~USD600b industry in India, of which e-tailing (online shopping for
physical goods) accounts for just 0.3%. Offline organized retail accounts for 8.7%.
91% of the market is still unorganized. E-tailing, a ~USD2b market in 2013, is likely to
grow at 63% CAGR to USD7.2b by 2016.
Exhibit 12: Online shopping of physical goods in India a USD2b market in 2013
Indian Retail
market=
USD600b
Offline
organized
market=
USD52.2b
Online
Retail=USD1
.98b
Source: Industry research, MOSL
Exhibit 13: set to grow at a CAGR of 63% over 2013-2016
Source: Industry estimates, Accel, Deloitte
November 2014
Demand in India exists across 4,000-5,000 towns and cities, and in ~95% of these,
there is no significant presence of offline retailers. As e-commerce evolves, it is
addressing a core need of connecting demand to supply.
Penetration of physical
retail, especially organized
retail is constrained by high
costs and low density
Offline retail has not been able to expand, as real estate cost as a percentage of
retail sales in India is as high as 14x that in the US. Real estate cost for large retailers
in India is ~7% of sales against 0.5% for companies like Wal-Mart in the US.
India does not have too many fashion or lifestyle brands that are bigger than
~USD200m in annual sales. There is huge fragmentation not only on the supply side,
but also on the distribution side. Beyond the top 10-15 cities, there is not enough
selection or distribution available through offline retailers for consumers.
Size of Indias e-commerce market to reach USD20b by 2015

The size of Indias digital commerce market, as defined by IAMAI, was USD11b in
2013. Growth in 2013 was 34%, and the industry is expected to grow faster in 2014,
with the advent of multiple enabling factors. We expect the size of Indias digital
commerce market to grow to USD20b by 2015, clocking a CAGR of 37%.
Exhibit 14: Expect Indian e-commerce industry to grow to USD20b by 2015
Source: IAMAI, MOSL
Various sources peg growth in the industry in the years to come at extremely high
rates, given the multiple enabling factors and an extremely low base.
Exhibit 15: Market extremely small v/s other large
internet populations
November 2014
Exhibit 16: Various sources peg extremely high growth

rates over years
10
E-tailing will be the fastest growing segment: As at the end of 2013, e-tailing
constituted only ~16% of the Indian e-commerce industry. However, as predicted by
Google India, this will be the biggest component of Indian e-commerce in a few
years. By 2020, e-tailing is projected to grow to USD45b, up from ~USD2b in 2013
and ~USD4b in 2014. This would then be the largest segment in the estimated
USD70b e-commerce industry by then.
Apparels is the largest etailing segment in China,
and the fastest growing in
India
Within e-tailing, fashion & apparel will grow fastest: 2013 saw a steep rise in the
fashion category, where e-commerce GMV doubled from USD278m to USD559m.
Fashion is likely to be a key driver of growth, going forward. It contributed 28% to
overall GMV of E-tailing, but is expected to contribute 35% to incremental market,
and grow to USD2.8b by CY16 (33% share v/s 28% in CY13).
Exhibit 17: Fashion is the fastest growing category in the Indian e-tailing market
Exhibit 18: From content to buying fashion the evolution of internet usage
Travel
Content
Electronics
Books
Fashion
Source: MOSL
Exhibit 19: Industry leaders now focusing on fashion & apparel
In April 2014, Amazon India started selling apparel on its India website, entering a fastgrowing and higher-margin category. This increased competition for Myntra and Jabong,
the top firms in the category.
Flipkart and rival, Snapdeal, had also been trying to build their apparel business. Flipkart
eventually bought out Myntra in May 2014, a month after Amazons entering the
apparel market.
November 2014
11
Growth drivers similar to those in China

E-commerce in
China is estimated to be
more than the combined ecommerce in the US, UK,
Japan, Germany and
France by 2015
China is experiencing huge growth in e-commerce. As of March 2013, China

surpassed all countries, except the US, in online retailing to become the worlds
second largest e-tailing market. In 2012, Chinese e-tailing had revenues of
~USD210b and had experienced compounded growth of 120% since 2003. E-tailing
accounted for 5-6% of 2012 retail sales in China v/s ~5% in the US, confirming that
etailing already had marginally higher penetration in China.
It is estimated that e-commerce in China (including e-tailing) will be worth USD540b
by 2015 and worth more than the e-commerce in the US, the UK, Japan, Germany
and France combined by 2020. This is linked with the number of people connected
to the internet in China, be it via computers or smartphones. There are over 600m
internet users and over 500m mobile internet users in China. The Chinese
government has a target to connect 1.2b people (85% of the population) to 3G or 4G
mobile internet by 2020.
Exhibit 20: E-tailing in China exceeded US, and there is yet no sign of scale impact
on USD306b base
Source: CNNIC, Estin & Co company analysis, MOSL
The thrust to Chinas e-commerce came from multiple factors:

Enablers for e-commerce in
China: Broadband
penetration | limitation of
offline Retail |Attractive
discounts | Flourishing
online marketplace
Broadband population the fundamental driver: Underpinning the growth of ecommerce in China is the worlds largest online population. China had 129m
broadband accounts in 2011 and has over 600m internet users, dwarfing the 81m
accounts and ~280 internet users in the US. Other enablers like expanded 3G+
coverage and wider card usage are just gaining traction.
Physical retailers co-exist

with marketplaces in the
US; Chinas online shopping
dominated by marketplaces
Filling a need gap: Chinas new consuming class increasingly has money to spend,
but in many regions, the offline (brick-and-mortar) retail industry is
underdeveloped. Etailing has produced super-charged growth because it is
successfully targeting and fulfilling this previously unmet consumer demand.
Marketplace-driven: Large B2C (business-to-consumer) sites are the clear leaders in
other countries, but not in China, where nearly 90% of the industry is marketplace
based. This compares with a marketplace share of just 23-24% in the US. With only
few major physical retailers developing a successful multi-channel approach,
marketplace operators have consolidated a huge market share. The largest online
marketplace operators Taobao, Tmall, and Paipai account for ~90% of the
November 2014
12
Chinese etailing market. Taobao alone had more than six million registered sellers
by the latest count. Marketplace operators generate revenue through online
advertising and, in some cases, charging sellers transaction fees.
C2C (consumer-to-consumer) refers to ecommerce activities between individuals
and includes transactions between micro-businesses that do not have company
registration or between micro-businesses and individuals. Micro-businesses and
SMEs are the sellers in most C2C transactions in China. In most other countries, most
C2C sales are secondary market transactions between individuals.
Exhibit 21: Marketplace drives e-commerce in China
Alibaba enjoys lions share

of the marketplace in China
Source: McKinsey Global Institute Report on Chinas e-tail revolution
Share of mobile internet

commerce up 10x from
1.9% in 2011 to 19% in
2014E
Mobility: Mobile commerce (purchasing via mobile phone) is not yet a significant
phenomenon in China. As of 2011, it accounted for only 1.9% of the e-tailing market
(USD2.2b). This increased to USD27b in 2013 and, in 2014, the share is estimated to
grow 10-fold to 19% (to USD51.6b). There is great potential for this segment to
continue after the take-off. The penetration of smartphones in China has gone up
from 24% in 2011 to 40% in 2013, and expected to grow to ~50% by 2018.
Exhibit 22: China's mobile commerce to grow rapidly with smartphone penetration
69% of Chinese consumers

have purchased through
their smartphones at least
once, compared to 46% in
the US
Source: www.techinasia.com
Aggression towards end

customer satisfaction is
seen to be much higher in
the Chinese
market v/s the US
November 2014
Difference v/s US: Chinese and US consumers have different expectations about
how their purchases should be delivered. US consumers do not expect one or twoday delivery from all e-merchants (although that is a feature offered by some
leading names), but they almost always have the option to pay extra for faster
delivery, which is available across most of the nation. Chinese consumers in the
largest cities expect next-day delivery, but that level of service is not available in
13
small cities. Cash-on-delivery (COD) has become a thing of the past in the US, but it
remains common among many independent B2C merchants in China.
Exhibit 23: Difference between Chinese and US e-commerce industries
Parameter
China
US
E-tailing Market Size
USD190-210b
USD220-230b
E-tailing as a % of Retail
5-6%
5%
Marketplace share
90%
23-24%
C2C share
70%+
<10%
Biggest product category
Apparel
Travel
Average EBITDA in the ecosystem
8-10%
8-10%
Share of Mobile commerce
2%
5%
Smartphone penetration
10%
42%
Payment
COD
Cards
Source: McKinsey Global Institute Report on Chinas e-tail revolution
Chinas Alibaba makes history

Biggest IPO ever in US market
Alibaba made a smashing

debut on the US bourse, up
~40% on the listing day
November 2014
Chinese e-commerce giant Alibaba sold ~USD25b in stock, making it the biggest
US initial public offering (IPO) ever, followed by Visa, ENEL SpA, and Facebook.
Alibaba accounts for ~80% of all online retail sales in China, where rising
internet usage and an expanding middle-class helped the company generate
gross merchandise volume (GMV) of USD296b in the 12 months ended June
2014.
For the fiscal year ended March 2014, Allibaba saw its revenue rise more than
50% to USD8.45b. Its profits, meanwhile, nearly tripled to USD3.75b.
14
Exhibit 24: GMV grows as market defies impact from scale
GMV continues to increase

on a high base
Source: Company, MOSL
Smartphones driving internet population in India

~200m Indians will come online over the next three years, and majority of the new
additions will be on smartphones. The number of Indians online increased from
140m in CY12 to 213m in CY13. Indias Internet population is set to grow to 342m by
2015, and 400m+ by 2016; making it the second largest in the world.
Exhibit 25: Internet population in India
Source: Dart Consulting, MOSL
Mobile will be a chief contributor to that trend 70% of the growth in Indian
internet users is mobile-only. Mobile shopping grew 8x in CY13, and is expected to
grow at a CAGR of 150% over CY13-16. Having said that, mobile revenue share is still
lagging mobile traffic share in India. This is because of the following reasons:
Most e-retailers do not have mobile optimized sites.

Though overall ad spends have grown 20% YoY and mobile marketing budgets
have doubled YoY, mobile marketing budgets are still less than 10% of overall
digital marketing budgets.
This is set to change. There is increasing focus on mobile as the most important
channel, given the increasing traffic share from mobile devices.
November 2014
15
Exhibit 26: Mobile internet users in India
Smartphones will more

likely drive penetration of
internet in India
Source: IAMAI, MOSL
Number of online shoppers surging

The number of online shoppers in India is expected to increase from 20m in 2013 to
~40m in 2016 a CAGR of 25%.
Young population driving sales: The young generation has emerged as the
driving force behind the growth of e-commerce in India. Nearly 90% of online
shoppers in India belong to the 18-35 year age group, while 8% fall in the 36-45
year age group.
Male-skewed thus far: While classifying the online shoppers based upon
gender, men contribute more to online shopping revenue. Nearly 65% of online
shoppers in India are male.
Security concerns: Around 30% of the people who buy from retail stores
actually research the product online. However, 25% people are still skeptical
about online security and do not share their financial information online.
Shipping resistance: 20% people blame high shipping costs as the main reason
for this, while 15% are unsure about the handling of the product during transit
and receiving the product in good condition.
According to a ComScore report, three out of every five internet users in India are
shopping online.
Exhibit 27: Three out of every five internet users in India shopping online
Increase in internet
population will be
accompanied with surge in
online buyers
Source: IAMAI
November 2014
16
Based on the above facts, demographics suggest a definite surge in growth as:
The age group of 18-35 will only keep spending higher as the years pass by,
increasing the per consumer spend on online shopping.
With apparel growing the fastest in the e-tailing segment, the gender skew of
shoppers towards male will also likely correct itself.
Concerns like doubts on online transactions would get attended to, as sellers
mature on one side and on the other, users experience the convenience by
transacting smaller values to start with, which should gradually grow.
According to a Forrester Research report, social networks play an important role
in driving consumers online and getting them to engage with brands. This would
gain specific significance in light of facts such as India being ranked as
Facebooks third largest audience after the US and Brazil.
Young population is at the

heart of the increasing
spending for online
shopping
Exhibit 28: 19-24 year olds the potential catchment

for online stores
Exhibit 29: Number of mobile shoppers should

double in three years
Source: Accel estimates, NSSO, Facebook
Source: Accel estimates
Exhibit 30: Growth in internet user base accelerating

Internet User (m)
Electronic Cards (m)
Broadband Subscriber (m)
Avg time (hrs)

350.4
300
228
121
5.5
0.03
0.05
2000
November 2014
38
No of users (m)
21
17.4
150
12.9
11
3
12.8
Till 2010
By 2015
2006
2011
2015
17
Average order value trending up

The average order value in 2012 was INR1,080, which increased by 67% in 2013 to
INR1,860. Two factors attributable to this are: [1] penetration of new categories like
jewelry, home dcor, etc, and [2] increasing user comfort in buying higher value
items online. The average order value is expected to nearly double and reach
INR3,600 by 2016.
Exhibit 31: With new categories, average order value
should go up
November 2014
Exhibit 32: and so should the number of orders per month
Source: Accel, Comscore and IAMAI
18
SECTION-II
Sizing up Indian e-commerce market

Dominated by travel; non-travel categories picking up
Digital commerce in India is a ~USD11b (INR630b) market, and online travel accounts
for 71% (INR449b) of this market.
Over CY09-13, the industry has grown at a CAGR of ~35%. E-tailing has led growth,
with a CAGR of ~59%, doubling its share from 8% to 16%.
Travel the largest segment; e-tailing the fastest growing

Indias ~USD11b (INR630b) e-commerce market is split into two main segments
online travel and non-travel. Over 2009-13, the industry grew at a CAGR of 34.5%.
Growth in 2014 is likely to be higher than the 33% growth witnessed in 2013. This is
mainly due to sustenance of high growth in the e-tailing segment, whose share in ecommerce continues to inch up. In 2009, online travel was ~78% of the industry,
which declined to 71% in 2013. Over 2009-13, e-tailing doubled its share in the
industry from 8% to 16%, growing at a CAGR of 59%, well above the industry.
Exhibit 33: Segmentation of digital commerce market in India
Source: IAMAI,
Exhibit 34: Digital commerce market in India

Digital commerce market by segment (INR b)
Online travel industry
E-tailing
Financial Services
Classifieds
Other online services
Online non-travel industry
Total
CY09
149.53
15.50
15.40
7.75
4.31
42.96
192.49
CY10
204.4
23.72
18.48
10.85
5.18
58.23
262.63
CY11
265.72
38.42
22.55
16.82
7.92
85.71
351.42
CY12
345.44
64.54
28.86
23.54
11.10
128.04
473.49
CY13E
449.07
100.04
36.07
30.61
13.88
180.60
629.67
Source: IAMAI, MOSL
November 2014
19
ONLINE TRAVEL
The entry of low cost carriers (LCCs) in the Indian aviation sector in 2005 marked the
beginning of the second wave of e-commerce in India. Their decision to sell tickets
online and through third parties enabled the development of online travel agents
(OTAs). They developed their own websites and partnered with OTAs to distribute
their tickets online. The Indian Railways had already implemented the e-ticket
booking initiative by the time LCCs started their online ticket booking schemes.
On an average, the online travel industry has grown 32% from INR149.5b in 2009 to
INR345b in 2012; it is likely to grow 30% in 2013 to INR449b. Currently, of the total
online travel market, domestic air tickets contribute 50% (INR173b), followed by
railway tickets, which contribute 39% (INR136b). Others such as international air
travel (INR19.26b), hotel bookings (INR7b), bus tickets (INR6.41b), tour packages &
travel insurance (INR3.03b) contribute the balance 10%.
Exhibit 35: Online travel Industry (INR b)
Online travel is ~71% of

digital commerce in India
expected to grow at a CAGR
of 20% over 2013-15
Source: IAMAI, MOSL
Exhibit 36: Domestic air tickets dominate the segment; increasing focus on hotel bookings
Source: IAMAI, MOSL
November 2014
20
A look at operating and financial metrics makemytrip.com

Makemytrip (MMYT) is the largest online travel company in India. MMYT
commenced operations in 2000.
Exhibit 37: Growth in air ticket transactions has softened
Exhibit 39: Gross bookings in hotels & packages

growing impressively
Exhibit 38: Hotel packages a nascent business, surging on

small base
Exhibit 40: Higher net revenue margin in hotels

justifies the focus
Exhibit 41: Growth in hotels & packages is driving more investments, causing losses
November 2014
21
E-TAILING
E-tailing comprises of buying consumer items such as books, apparel & footwear,
jewelry, mobiles, cameras, computers (desktops/laptops/net books/tablets), home
& kitchen appliances, home furnishings, vouchers/coupons, flowers and toys, and
gifts online. The e-tailing category has grown from INR15.5b in 2009 to INR64.54b in
2012. This category is estimated to cross the INR100b mark in the year 2013.
At present, laptops/netbooks/tablets contribute the most, i.e., 24.5% (INR15.79b) to
the e-tailing segment, followed by apparel & footwear, which contribute 20.6%
(INR13.31b). Mobile phones, cameras, and mobile & camera accessories together
contribute another 33%. In all, these four categories form nearly 80% of the e-tailing
pie. Of the remaining 20%, consumer durables & kitchen appliances, books, and
home furnishings contribute another INR5b, INR2.9b, and INR2b, respectively.
Emerging categories, comprising products like deals/coupons, toys, gifts,
handicrafts, flowers, etc, contribute just about 3% of the e-tailing pie.
Exhibit 42: E-tailing is the fastest growing category in the Indian e-commerce market
E-tailing is currently ~16%

of digital commerce in
India, but expected to grow
the fastest
Exhibit 43: E-tailing market segmentation: Electronics lead by value
Source: IAMAI, MOSL
Exhibit 44: Top e-tailing sites in India
Source: Company
November 2014
22
CLASSIFIEDS
Classifieds, the earliest entrant in the e-commerce space in India, is undergoing a
shift in operational model from vertical to horizontal offering. Players now offer a
gamut of services ranging from buying/selling cars to finding domestic
help/babysitters. E-commerce is set to continue on its growth path on the back of
stabilization of the ecosystem and interest demonstrated by VC players, coupled
with support from the Government of India (GoI).
The classifieds market, estimated at INR23.54b in 2012, has seen significant growth.
The segment includes services like online jobs, which contribute a huge 60%, valued
at INR13.8b, online matrimony, which constitutes 22% (INR5.08b), and other B2C
classifieds (cars, real estate, etc), which contribute ~7% (INR1.66b). B2B classifieds
comprise 13% of the overall classifieds market. Classifieds as a category has seen
45% CAGR from 2009, and is likely to grow 30% in 2013 to reach INR30.6b.
Exhibit 45: Classifieds, one of the oldest segments to go online, growing slower
than other segments
Google estimates that

classifieds is a USD350m
industry today, set to grow
to USD850m in the next 3-4
years
Source: IAMAI, MOSL
Exhibit 46: Components of classifieds (2012)

Online Jobs
Online Matrimony
Other B2C Classifieds (Car, Real Estate etc.)
B2B Classifieds
%
INR b
58.6
13.8
21.6
5.1
7.1
1.7
12.7
3.0
Source: IAMAI, MOSL
A look at operating and financial metrics Info Edge (India)

Info Edge (India) Limited (Info Edge) is Indias premier online classifieds company in
recruitment, matrimony, real estate, education, and related services.
Recruitment: This comprises online recruitment classifieds (www.naukri.com,

Indias leading job site, and www.naukrigulf.com, a job site focused on the Middle
November 2014
23
East job market) and offline executive search (www.quadranglesearch.com). Related

sites in this business are a professional networking site (www.brijj.com) and a
fresher hiring site (www.firstnaukri.com).
Exhibit 47: Steady growth in resumes on Naukri.com
Exhibit 49: Naukri.com has been the companys

key revenue driver
Exhibit 48: Unique customers have grown even in

tough macro
Exhibit 50: Recruitment is the only profitable segment

for the company
Real estate: This comprises online real estate classifieds (www.99acres.com) and a
real estate brokerage business (www.allcheckdeals.com) housed in subsidiary,
Allcheckdeals.com India Private Limited.
Exhibit 51: Listings on 99acres are growing at a rapid rate
November 2014
Exhibit 52: Paid transactions growth is marginally

behind listings
24
Exhibit 53: 99acres is evolving nicely in terms of scale
Exhibit 54: The business remains in investment mode for now
Matrimony: This comprises online matrimony classifieds (www.jeevansathi.com)

and 14 offline Jeevansathi Match Points.
Exhibit 55: Demographics drive bookings growth
at Jeevansathi
Exhibit 57: Revenue growth remains relatively subdued
November 2014
Exhibit 56: Re-strategizing the model has helped

increase paid clients
Exhibit 58: Continuing to make losses amid

management tinkering
25
A look at operating and financial metrics Just Dial

Just Dial Limited provides local search related services to users in India through
multiple platforms such as the internet, mobile internet, over the telephone (voice)
and text (SMS).
Exhibit 59: Number of listings continue to grow,
given strong proposition
No of business listings (m)
Exhibit 60: So do the number of campaigns

No of campaigns (in 000s)
Paid campaigns as % of total listings
2.3
2.4
2.0
11.8
9.1
7.2
6.0
2.2
1.4
4.5
FY10
FY11
FY13
FY12
FY14
62
120
171
207
262
FY10
FY11
FY12
FY13
FY14
Exhibit 61: Revenue growth remains high in a

fledgling industry
Exhibit 62: Network effect in classifieds helps profitability,

as with INFOE
Sales (INR m)
52.4
EBITDA (INR m)
42.5
40.5
38.4
23.5
27.2
24.7
30.8
27.8
25.7
23.5
859
1,309
FY09
FY10
2,621
1,839
FY11
4,613
3,628
FY12
FY13
FY14
1,422
8.8
1,008
76
308
FY09
FY10
672
454
FY11
FY12
FY13
FY14
Exhibit 63: Net income and cash metrics strong

PAT
139
Free cash flows / PAT (%)

144
Cash flow from operations
1,719 1,641
136
97
79
359
260
329
295
504
685
1,206
FY10
FY11
FY12
FY13
FY14
November 2014
Free cash flows
FY10
601
409
FY11
957
726
FY12
1,023
662
FY13
FY14
26
EXPERT SPEAK: Google India on their play in classifieds market

We interacted with Mr Nitin Bawankule, Industry Director at Google India Ecommerce, Classifieds, and Media. Our key takeaways:
Google India is not direct competition in most of the existing classifieds

market
November 2014
Google Indias play in the classifieds space: Search is constantly evolving and
Google makes about 500 changes every year to its search product alone. Google
Search is focused on helping users find the most relevant answers to their
queries, and is not direct competition in most of the existing classifieds market.
The classifieds market is broadly divided into four categories jobs, matrimony,
real estate, and local vendors information. The segment where Google provides
relevant information to a consumer or end user directly is the local information
space. Example: searching for a local restaurant in Mumbai. OLX, Quikr, and
JustDial not only provide local information, but also get into the transaction
mode Google is not a player in that. Googles role for now is providing paid
links and organic results in the form of information to the customer.
Co-existence of paid links with classifieds players like Info Edge, JustDial: These
models were followed by search engines and directory kind of services. When
Google launched Search, it was clear that it will only surface advertisements that
will be clearly demarcated as advertisements and also show organic results.
Even the ads Google surfaces have to be relevant to the search query, so that
users find the information useful. Google is very different from these services.
On the possibility of mobile being a threat to search: Google has been focused
on being a mobile-first company. Every product Google makes, it first makes for
mobile. Google is very pleased that users enjoy using Google Search even on
mobile phones. Search has evolved a lot and today Google offers services like
Google Now, which provides information to users even without search queries.
Mobile is an exciting space and Google continues to innovate rapidly to benefit
both users and advertisers. Google recently launched the deep linking feature
for mobile phones. If a user searches for Flipkart on his mobile, and the app is
installed, Google directs the user to the Flipkart app on the mobile and not to
the website.
Monetization: Even a deep linking feature is monetized. If a user is directly
taken to any app through a Google Search, it is counted as directing the user to
the client.
27
FINANCIAL SERVICES
The financial services market, valued at INR28.86b in 2012, is likely to grow 25% in
2013 to INR36.07b. Online financial services include applying for insurance or paying
insurance premiums/renewals (29%; INR8.5b), payment of utility/mobile bills and
mobile bills (40%; INR11.5b), and trading in shares and other financial securities
(31%; INR8.9b).
Exhibit 64: The allied industry is growing in tandem with overall growth in
digital commerce
Low credit and debit card

penetration limits the
expansion of online
financial services
Source: IAMAI, MOSL
Exhibit 65: Components of financial services (2012)

%
INR b
Insurance Related Services
29.4
8.48
Utility Bill Payments including Mobile Bill Payments
39.8
11.48
30.8
8.9
Online transactions for financial services like Shares & Securities Trading
Source: IAMAI, MOSL
Other online services

The other online services market is estimated to grow 25% in 2013 to INR13.88b.
Online services such as buying entertainment tickets and food & grocery online fall
under this section. The market for buying online tickets for movies, sports events,
concerts, etc, is valued at INR7.95b, and forms ~75% of the online services pie.
Online delivery of food (INR2.5b) and grocery (INR0.65b) constitutes ~25%.
Exhibit 66: Other segments could grow to substantial scale, as the industry matures
Source: IAMAI, MOSL
November 2014
28
Exhibit 67: Components of other online services (2012)

Online Entertainment Ticketing (Tickets for Movies + Sports + Shows/Concerts)
Online Food Delivery
Online Grocery Delivery
%
INR b
71.6
7.95
22.5
2.5
5.9
0.65
Source: IAMAI, MOSL
Digital advertising market growing in sync with e-commerce

Digital advertising has been witnessing steady growth. The online advertising market
in India is projected to reach INR29.4b by March 2014; in 2012, the market had
grown 40%, followed by 30% growth in 2013.
Exhibit 68: Digital advertising market growing in sync with overall digital commerce
Source: IAMAI, MOSL
November 2014
29
SECTION-III
All about share gains

Discounts, acquisitions to continue; profits elusive
Apart from discounts,

money is aggressively being
invested towards mobile
platforms, logistics services
and hiring talent / strategic
acquisitions
Competitive intensity is running high in the Indian e-commerce industry. In their quest
to gain market share, all the big players are investing aggressively.
Flipkarts acquisition of Myntra and Zovis acquisition of Inkfruit are just two examples
of recent acquisitions in the industry. Appointment of leaders for acquisitions at
Flipkart and Amazon (India) suggest there are more in the pipeline.
Also, most of the amount of money raised by Flipkart, lately Snapdeal, and that
committed by Amazon is yet to be invested, indicating that we may not be anywhere
near the end of round-the-clock discount seasons at online stores.
Applying the five competitive forces model to the industry, we find a red ocean at
large. Profitability could be a few years away.
Aggressive investment spree, as war for share gain heats up

Deep discounts for customers and big incentives for merchants who sell on their
marketplace are driving investments for all the online biggies. Other than these,
spends are directed at: [1] capacity enhancement by building warehouses, [2] hiring
in large numbers, [3] strategic acquisitions, and [4] exclusive tie-ups with select
brands.
Exhibit 69: Round-the-clock discounts on online stores
Acquisitions on the rise

As the race to lead share gains in the industry heats up, acquisitions will be key to
expansion into new categories and to gain new technologies.
Flipkart hired a former venture capitalist to lead its mergers and acquisitions
(M&A) team. Nishant Verman, an associate in the Delhi office of Silicon Valley
November 2014
30
venture firm, Canaan Partners, will now lead the charge at Flipkart to acquire
companies and invest in startups.
Amazon India has roped in Abhijeet Muzumdar, former vice-president at
Bessemer Venture Partners, to lead its corporate development function.
Snapdeal chose Abhishek Kumar, head of investments at venture firm, Palaash
Ventures, for a similar role.
Exhibit 70: E-commerce acquisitions

Date
Target
Acquirer
Description
Myntra.com gets acquired by poster boy of Indian e-commerce, Flipkart. The deal
values Myntra reportedly at INR20b and is a 100% acquisition in cash and stock. After
the acquisition, Myntra will continue to operate as a separate entity, with the CEO of
Myntra heading the fashion business.
2014 May
Myntra.com
Flipkart
2013 June
Redbus.in
Ibibo
redBus.in acquired by Ibibo group backed by Naspers group reportedly for INR8b.
2013 February
Inkfruit.com
Zovi
Mumbai based Inkfruit.com (a community based customized fashion and accessories

retailer) was acquired by Bangalore based online fashion retailer Zovi.com.
2012 February
Letsbuy.com
Flipkart
Letsbuy.com got acquired by Flipkart for cash and equity. The Letsbuy team of 350+
was expected to continue to function independently with access to Flipkarts
technology platform and supply chain capabilities.
Source: News articles, MOSL
Chasing sales exclusivity in select brands

Snapdeal took exclusivity to
another level, becoming
exclusive e-commerce
sponsor of the latest edition
of reality TV show Big Boss
Flipkart, which created a trend among e-commerce players for exclusive online
launches, has unveiled over half a dozen brands, including Asus, Alcatel,
BlackBerry, Motorola, and Xiaomi through its portal.
Amazon launched sales of a Samsung phone and Swipe's Slice tablets,
exclusively. Besides, companies such as Snapdeal, Jabong and Pepperfry are also
ramping up exclusive online launches.
The trend has picked up, and players are now looking to extend these web
launches to other categories, such as sunglasses, watches, books, apparel, and
other non-electronic categories.
Motorola has sold over one million Moto G units through Flipkart. Motorolas
ranking in India went up from zero to fourth in just four months of its launch on
Flipkart.
A win-win-win model: Such launches reduce the dependency of brands on offline

channels while cutting margins of distributors and intermediaries. Besides, this helps
in cutting down the huge marketing budget. As a result, they are able to pass on the
benefits to consumers. It also helps the brands scale up fast.
War for talent

Hiring activity in e-commerce is likely to grow by over 30%, which may help create
up to 50,000 jobs in the next one year (Source: Randstad India). Some other analysts
anticipate that the number may go up to 80,000-100,000 jobs this year alone, given
the rate at which the sector has been growing in recent months.
Hiring had been rather slow in the e-commerce space in the last couple of years, but
recruitments may grow rapidly now by 33% over the previous year, as various retail
brands are also bringing their business online.
November 2014
31
Employers are currently targeting FMCG and Telecom companies. Between them,
the 10 top e-commerce firms plan to hire 60,000 people for the year ending March
2015, the highest in a year for the fledgling industry. The job creation data is for the
entire ecosystem: ancillary units, supply chain and logistics, and temporary
employees. The main factors revving up the numbers is geographical expansion and
competition.
November 2014
Flipkart will double headcount to 26,000 this fiscal. Of these, 1,200 will be
engineers.
Amazon too is expanding and pays two-year joining bonuses of over INR4m at
the top levels.
Myntra plans to double its headcount this fiscal from a team of 500 employees.
Snapdeal intends to double headcount to 2,600 from 1,300 currently, and
increase the number of engineers from 250 to 500.
Zomato, the online food and restaurant listings startup, intends to double its
numbers from 650 in core functions such as technology, sales, content, and
operations because of its expansion in various countries.
Yatra, the online ticket booking site will add 200 to its employee strength of
1,000, against 150 last year. This excludes the addition of third-party workers.
Jabong will hire 750 employees this fiscal. Although the number is similar to last
year, full-time hiring will be 150 compared with 300 in FY14, while the rest will
be in the supply chain.
Ola cabs will hire 300 employees this year and 10,000-15,000 drivers, compared
with 150 permanent employees and 5,000 drivers last year.
TaxiforSure will expand to 15 locations by 2015, and as a result, overall
headcount will rise from 435 to 1,500.
32
Bringing more merchants, spending on warehouses

Flipkart, which adopted a marketplace model last year, aims to increase the number
of sellers to 50,000 in the next year from the current 4,000+. It runs six warehouses
and intends to open 50 more in the next three years. Amazon is also increasing its
warehouse count to 10, with three new ones coming up in Bhadarpur
(Maharashtra), Manesar (Haryana), and Ghaziabad (Uttar Pradesh).
Segmental approach to growth

New horizontal players have typically been more focused on electronics and books.
Presumably, this brings scale and helps them show customers that they can provide
products at lower costs quickly. This is how Flipkart scaled up too, by focusing on
books initially, and then on electronics. Amazon is following a similar route in India
currently. For Flipkart, fashion has now become its most important category,
especially after it acquired fashion portal, Myntra in May 2014, contributing to onethird of the company's sales.
Profits elusive amid fierce competition

With the industry just about taking off for a multi-year multiplicative journey, and
limited moats to business inviting significant financial muscle to outdo competition,
it is understandable that the focus on profitability is off the radar for now. As a
result, online channels are currently making losses at the gross profit level as well,
owing to hefty discounts on the Cost of Goods sold (COGS), additional charges
incurred on shipping, packaging etc. Losses vary from category to category,
depending upon the level of discounting, inventory handling among other factors.
Exhibit 71: Loss at the gross margin level across categories
Given little differentiation in

the product offering, brand
recall and share gain are
primary endeavors, driving
investments to lure
consumers
Source: Sequoia Capital, News articles
Burn is currently at multiple levels that drive loss at the gross margin levels:
Discount to attract consumer
Free Shipping
Cost of Delivery
Warehousing
Inventory and Write-offs
Manpower
Packaging
While some of these are here to stay despite the effect of increasing scale, pressure
on profits from others should come down gradually. Discounts are the primary burn
that one would expect to reduce once the market consolidates or growth begins to
November 2014
33
taper. Other costs per shipment that will reduce with scale include warehousing,
shipping and packaging.
Fierce competition: The industry largely remains in investment phase, and the
greatest hurdle is fierce competition, spurred by the glut of investments over the
last few years. There could be as many five well-funded players battling it out for
the same small niche. For example, the market for baby products in the United
States is owned by diapers.com. Three different Indian companies are fighting it out:
Firstcry, Hushbabies, and Babyoye that had raised a combined USD30m as of 2012.
The companies have been fighting a price war that has pushed margins to almost
nothing on the most basic orders, like those for diapers and soap.
Limited brand recognition: The problem of competition is compounded by very
little brand recognition, barring select leading names. This implies heavy cost of
customer acquisition. As a result, even sales of high margin goods struggle to cover
the cost of referred customer acquisitions through discounts or ad words
marketing has been a huge bleed for e-commerce companies.
Too much money too early: What also is of little help to entrepreneurs is
unreasonable investor pressure. Too much money too early in the game is going to
make investors go after metrics that will not be profitable in the long run. This is
driving practices like focusing on the number of new account sign ups rather than
the number of customers who become habitual customers.
Profit history of large e-commerce case studies outside has been mixed. Globally,
Amazon, the world's largest online retailer, founded in 1994, has never been
profitable since inception. In contrast, China's Alibaba, the world's largest online
marketplace, has had a far smoother road to profitability, given that it does not own
any of the products sold on its flagship websites, Taobao and Tmall.
Exhibit 72: Despite two decades of leadership, Amazon is just about profitable
Aiming to turn profits, but may have to wait

The nascent e-commerce industry has been pursuing growth at the expense of
profits. Towards the end of 2013, leading Indian online retailers, including Snapdeal
and fashion portal Myntra, cited that they expected to turn profitable in the next
two years.
November 2014
34
Some leaders aspire to turn profitable in two years
We want to be India's first profitable e-commerce company and its

largest mobile commerce company.
Kunal Bahl
[In fiscal 2013, Jasper Infotech, Snapdeals parent, posted losses of INR1.2b, wider
than the INR812m loss in fiscal 2012, according to data filed with the RoC.]
Only at scale can you amortize technology and marketing costs.
Without scale, profits might be possible but are meaningless
Mukesh Bansal
[In FY13, the company had sales of INR2.1b and a loss of INR1.3b, according to data
from the Ministry of Corporate Affairs.]
but this cannot come at the expense of significant share loss
While the requisite scale to focus on profitability may be on the horizon,
competition will likely determine how soon the leading players can turn profitable.
While the choice is between sales at any cost or sustainable growth, e-commerce
companies cannot afford to take their foot off the accelerator any time soon.
Flipkart has raised another USD1b, Snapdeal raised USD627m+ and Amazon has
committed USD2b towards growing e-commerce in India, and majority of this
amount is yet to see investment more discounts will be a large part of the
allocation. These are worrisome trends for players hoping to cut down discounts in
the near future.
The main reason for this focus on profits is the push from risk-capital funds.
However, the larger investors seem to be patient and encouraging of the aggressive
approach to grow sales and build market leadership.
Flipkart: Our focus right now is still on investing in our growth story. Currently, our
business is growing at 100% (annually) and till this growth slows down, we will not
be looking at profitability as a factor. Binny Bansal, Co-Founder.
November 2014
35
Additional factors challenging profit generation

Problem of logistics has led some to incur more costs
Indian e-commerce companies have had to overcome serious hurdles. Among

the largest of them is logistics. While major multinationals like DHL and Fed-Ex
operate in India, goods are normally shipped through smaller and cheaper thirdparty carriers.
Different carriers have to be used for different regions of the country. For orders
sourced outside the major cities, individual couriers often have to be hired to
make last mile deliveries from drop-off points by bicycle.
The difficulties and unreliability of the carriers has forced some of the largest
and best-funded players, like Flipkart, to develop their own logistics arms to
deliver their packages. The decision, however, carries massive capital expenses
in an industry that is still not standing on its own feet. It also means a huge
increase in exposure, and a business that is now seeking success in two
industries instead of one.
Exhibit 73: Shipping costs are a drain on profitability, a silver bullet for customer
experience
Cash-on-delivery adds on to the challenge

While cash-on-delivery is a
challenge, it is here to stay,
being a key enabler of
industry growth
Another difficult problem is that the Indian market demands a cash-on-delivery

(COD) option, where the consumer pays the courier on receiving the product.
This is a difficult problem to get around because credit card penetration is
relatively low in India.
The problem is that the COD system delays receipt of payment. Courier
companies generally hold the money for two weeks, which means that the ecommerce company has to replenish inventory before cash from its last sale has
arrived. It is also expensive; some courier companies charge over 3% for the
service.
High return rates

Presumably the biggest hit comes from the much higher return ratesometimes up
to 10%by consumers who simply changed their mind or could not be reached at
home. These goods cycle back into inventory after weeks, and carry a high cost of
re-stocking and re-listing, and sometimes have to be written off altogether.
November 2014
36
Competitive forces: Red ocean at large

Profitability may be few years away
E-commerce companies are trying to outperform their rivals to grab greater share.
With the market space getting crowded, prospects for profit are low.
Products are becoming commodities, and cutthroat competition is turning the market
into a red ocean.
Intensely competed space, where customer retention is a costly affair
Threat of new
entrants
HIGH
Bargaining
power of buyers
HIGH
Rivalry among
existing firms
HIGH
Bargaining
power of
suppliers
LOW
Threat of
substitutes
HIGH
Source: MOSL
Threat of new entrants: HIGH

Threat of
new entrants
HIGH
November 2014
Typically, barriers to entry in any industry are capital, knowledge, or skill. Some
models in e-commerce, like inventory-led, are highly capital intensive which act
as greater entry barriers. Marketplaces offer few barriers to entry, as do the
skill-sets, which are acquirable.
Additionally, technology can be a barrier for new entrants, for instance, where
competing businesses have heavily invested. Their investment would act as an
entry barrier for new players. However, advancements in technology have given
rise to new ideas, providing opportunities for new entrants without the need to
build similar IT infrastructure.
While a vast network of suppliers is difficult to replicate for a new entrant, there
remains room for category-focused players, with strong backing of funds, to
compete aggressively in the market. As a result, in most models for ecommerce, the threat of new entrants is high.
37
Threat of substitution: HIGH

Threat of
substitutes
HIGH
It is easy to sell on the internet, so, at the moment; E-commerce is acting as a threat
to other channels of selling. However, products sold on one platform can be sold by
others firms that are inside or outside the industry. For example, if the buyer is not
sure about the product quality that will be delivered through an online order, he can
buy from a competing offline seller. Given the multitude of options available, there
looms a threat from substitution for the industry.
Rivalry among existing firms: HIGH
Rivalry
among existing
firms:
HIGH
The industry is growing, and the products on sale are not very differentiated.
Some firms try to differentiate themselves by adding value through additional
information for customers in case of category-specific portals; others are
striving to differentiate by investing in better overall shopping experience for
the customers. Some others are devising ways to encourage customers to spend
more time at their site.
However, above all these, the competitive intensity is being manifested in fierce
price war, driving higher losses. This is clear substantiation of strong rivalry
among existing firms.
Bargaining power of buyers: HIGH

With the location proximity being least of buyers concerns, they can easily switch
their seller, without any loyalty. Buyers have high bargaining power; it is easy for
them to find another supplier in the industry. They have no loyalty to a particular
brand. They look for cheaper and better products. They also have plenty of options.
Bargaining power of suppliers: LOW

Bargaining
power of
buyers
HIGH
In general, suppliers have low bargaining power. Online is becoming a popular

medium for the buying community, and the seller has little choice but to adapt to
the changing consumer attitudes. There are multiple suppliers of the products that
e-commerce companies sell through their websites. Hence, staying on the fence is
not an option. This is especially the case for products like books, electronics and
apparels.
Regulatory enablers will be key
Bargaining
power of
suppliers
LOW
November 2014
There are no existing policies that govern FDI in e-commerce; they are clubbed
under the general rules for FDI in retail. As per extant FDI policy, FDI up to 100%
is permitted in B2B e-commerce activities under the automatic route. The
regulation has driven the choice of marketplace model by multiple companies
like Amazon and Flipkart.
The rise of e-commerce has posed new questions for taxation policies and
administration. E-commerce blurs the distinction between the sale of goods, the
provision of services, and licensing of intangible assets. Each of these is subject
to some form of taxation. According to media reports, tax authorities in
Bangalore, are looking into why Amazon India does not pay VAT on goods stored
in its warehouses. (More details appear in APPENDIX III).
38
SECTION-IV
The conundrum of business model

Snapdeal appears to have the most optimal strategy
The juggle between marketplace and inventory-led business models has been
going on for a long time now.
E-commerce in India is gradually shifting to the marketplace-led model from
the inventory-led business model.
We like Snapdeal. It is focusing on providing the best marketplace and
attracting the maximum number of merchants.
The fashion segment provides room for category-focused players. Jabongs
combination with four other global entities is a unique development with rich
potential.
Four distinct features set apart an inventory-led e-commerce model from a

marketplace model:
Opinion remains divided on
the best model; but FDI
regulations currently limit
Flipkart and Amazon to
marketplaces
The value proposition to a customer for the inventory-led e-commerce models is

that whatever a customer buys, is from the sellers own inventory.
Second, there is only one seller for each product sold by these companies
usually, the companies themselves.
Third, these companies are merchants of record for the products sold by them.
Finally, these companies issue invoices to the customers in their names.
All these four distinctions are not applicable on a marketplace model. Multiple
models are in place today. We discuss below the merits of each.
Hybrid marketplace-led model

Hybrid model is where the seller sells his own labels and also provides a platform for
merchants and sellers to sell their products. However, in the hybrid model, there is a
conflict of interest from the merchants viewpoint, as he sees the platform provider
selling his own goods as well. This may lead to a situation where the platform owner
uses the information edge to his advantage, by pricing his own inventory of the
same brand marginally below the merchants to prioritize his/her inventory.
Inventory-led model
For a market like India, where customers have low faith in shopping online,
customer satisfaction is of prime importance. The inventory-led model ensures
quicker deliveries, coherent quality checks, and better customer experience. That is
how Amazon operates in the US, and with regulators permitting, it would want to
replicate in India. This is a capital-intensive model, but with greater barriers to entry.
The inventory led e-commerce models have almost the same economic
characteristics as the traditional brick-and-mortar model when it comes to inventory
risk exposure, warehousing, and sourcing. It is highly unlikely to achieve good
profitability with no notable instances to substantiate. For a 30% gross margin
business, the inventory-led model involves spends of 45-50% on operating
expenses.
November 2014
39
Why Snapdeals marketplace and strategy will likely work

Snapdeal significantly outgrew the industry in FY14, growing its GMV by over 500%
compared to the industrys growth of 88%. This is attributed to multiple facets of
the companys strategy, which has helped it to create ground to continue delivering
rapid and capital-efficient growth over multiple years:
Focus on building the best marketplace: Snapdeal has kept its goal very simple
to build the best ecommerce marketplace in the country for buyers, sellers
and logistics systems, without competing with them.
Rapidly building the supply side: Snapdeal already has ~50,000 sellers on its
platform. In the next 12 months, this could exceed 100,000. Unlike hybrid
models or inventory-led platforms, there is no conflict of interest at a pure
marketplace. Snapdeal is not competing with the vendor or the logistics player.
This makes the model amenable for more vendors to join the platform.
Strong thrust on driving mobile traffic: Mobile traffic for Snapdeal increased
from 5% to 50% last year. It expects this proportion to go up to 75% in a year. In
many tier-II towns, it is already seeing 70%+ traffic on select days.
Investment in facilitating logistics through Safeship: Snapdeal is not directly in
the logistics business. Its logistics requirements are met by over 20 companies,
for a majority of whom Snapdeal is a major driver of volumes. It manages
deliveries through a proprietary system called Safeship'. Safeship provides a
single window fulfillment service to sellers, taking care of all activities carried
out after booking an order to successfully and safely delivering it to the
customer's satisfaction.
EXPERT SPEAK: Mr Kunal Bahl Co-founder and CEO, Snapdeal

Marketplace a proven model globally, will drive capital-efficient growth
E-commerce: USD50b opportunity in 10 years
Though e-commerce has been present in India for the last 15 years, the last 2-3
years have been a period of hypergrowth, led by growing usage of social media
platforms like Facebook. Indians are increasingly shopping online and this is getting
reflected in stronger e-commerce. The market size for e-commerce in India is
currently USD1.5b, which is just 0.25% of the total Indian retail market. In
comparison, online retail penetration is ~10% in the US, 6% in China and 10% in
Korea. Online retailing in India presents a huge opportunity a 5% penetration of
online retailing in India would mean an opportunity size of USD50b, assuming a
USD1t retailing market in the next 10 years (current size is USD600b; assume
modest 5% CAGR over the next 10 years).
Offline retailing: Indian prices but European costs

Offline retailing in India is at a competitive disadvantage. Real estate rentals
comprise 7% of revenues for brick-and-mortar retailers in India, 14x Walmart's 0.5%.
Further, there are significant physical barriers to set up shops in India, which
encourages organized retailing to skip the physical format and move directly to the
online format.
November 2014
40
Exhibit 74:
Our focus at Snapdeal has

been just build the best
marketplace that you can.
There is an enormous
amount of opportunity in
the market largely because
you are solving a core
need.
Marketplace: Globally proven model

The model of marketplace being the best option has proven true time and again in
multiple markets. Snapdeals model is most similar to Chinas Alibaba. At USD250b+
annual GMV, Alibaba has not had to own a single product. There is no real need for
a rush to own inventory in India either.
Marketplace models enjoy an edge when it comes to profitability

E-commerce is a 100-year play. Commerce is increasingly going to get digital. As the
companies scale, the economics of the business will only get better. Focusing on
profitability too soon by lowering marketing spend will be short-sighted. Having said
that, as the attention increasingly shifts to profitability, marketplace models will
have an edge. In inventory-led models, business economics tend to get worse as
companies get bigger.
Snapdeal is focused on providing the best marketplace, with its fulfillment center
trying to keep a check on quality to the extent possible. The clear benefit of the
model is that it is likely to attract the maximum number of merchants, and that is
also Snapdeals endeavor. Our belief is that if and when the industrys discounts
start matching physical stores offline, the convenience of online shopping will
continue to draw consumers. At that point, the platform offering maximum choices
will gain popularity over others, keeping Snapdeal well placed. Flipkart is targeting
10,000 merchants by FY15. Snapdeal currently has ~50,000 merchants.
November 2014
41
The value chain for Snapdeal platform

1. The customer purchases the product.
2. The seller packs it and informs the courier agency.
3. The courier agency collects the parcel, delivers to the customer and collects the
money.
4. Snapdeal receives the money from the courier agency, deducts its share and
sends the balance to the seller after a time gap. This ensures that Snapdeal is not
exposed to debtors' risk. However, Snapdeal has no direct control on product
quality and if a sub-standard product is delivered, it runs the risk of customer loss.
Sellers see the benefit of
Safeship as the pricing for
logistics is far more
attractive since it happens
through Snapdeal, which is
the largest e-customer for
most of the third party
logistics companies in India
Safeship benefits the seller and the consumer
Faster shipping through real-time order visibility: 'Safeship' offers a

technology-based platform through which sellers can view orders real-time. This
helps in streamlining the back-end operations of the sellers such as
procurement, storage, and packing to service customer orders.
On time and safe deliveries: 'Safeship' plays a key role in ensuring product
delivery in a timely and safe manner by arranging pick-ups through empanelled
third-party logistics providers authorized by Snapdeal with clear standard policy
and standard shipping rates. Snapdeal manages the entire delivery logistics and
engages the customer throughout the process.
Wider reach: 'Safeship' provides wider pan India reach by giving a chance to the
seller to sell through a national courier network. The seller can work with
multiple courier partners without the hassles of management overheads.
Optimized cost: 'Safeship' technology optimizes between cost and service levels
through proprietary algorithm to route shipments and ensures that the product
reaches the customer at the best shipping cost without making any compromise
on service levels.
Shipment tracking: From consumers perspective, 'Safeship' provides 100%
tracking for shipments from the time of order booking to delivery. It also
ensures safe deliveries and offers free transit insurance.
Room for single-category players in fashion segment
The market opportunity

for e-commerce stands at
USD16b by 2017, with the
fashion e-commerce market
dominating at USD6b
Praveen Sinha, Founder and
MD, Jabong
November 2014
Online fashion selling requires initiatives and forays unique to the industry, than
merely connecting buyers with sellers. Some instances focusing on the different
aspects that need to be tinkered with in selling fashion:
Jabong launched the monthly fashion magazine, Juice, targeted at young Indian
e-shoppers looking for a guide that fulfills their aspirations, making fashion
accessible, affordable and attainable. Juice also has access to 800 of
Jabong.coms brands, including Vero Moda, ONLY, Jack & Jones, Steve Madden,
Dorothy Perkins, GAS, Rohit Bal, Wendell Rodricks, and more. Juice is a part of
Jabong.coms expansion plans and foray into fashion content publishing. This
fashion and lifestyle magazine is complimentary for Jabongs customers.
Myntra.com launched a Look Good Helpline, allowing customers to talk to a
stylist for personalized advice either by phone or email. It has become a hit
among young shoppers and peers like Jabong have also rolled out similar
services. Jabong.com, Like Myntra, has added stylists on call to help consumers
and plans to offer live chats with its advisors in the coming weeks. Both Jabong
and Myntra have lined up more than 20 stylists each to help consumers. Many
42
people hired have worked with top models. Others are professionals who have
worked as magazine stylists.
Jabong has stayed at the forefront of leveraging high-end technology to create
incredible customer experience. It is one of the first e-commerce companies to
launch product videos. Customers are able to see models walking on the ramp
LIVE with the chosen product. This creates an in-store like experience on the
website.
Jabong launched the Jabong Online Fashion Week in 2014. Bridging the gap
between aspiring artists and the dynamic fashion industry, it invited applications
from brilliant fashion designers from across India.
Given these specific needs, the segment requires focused attention and innovative
strategies that are unique to fashion sales alone, and hence, it is not surprising that
focused segment players like Jabong and Myntra score over others.
Jabong Key player in the fashion e-tailing segment

Flipkart, Amazon and Snapdeal have become household names as far as online
buying across multiple categories is concerned. Among focused category players,
the only prominent names in the fashion segment include Jabong and Myntra (now
bought out by Flipkart). Jabong has seized the fashion opportunity with a strong
focus on creating the best in class customer experience, exclusive tie-ups with
known global brands like River Island, Mango, Dorothy Perkins, and Miss Selfridge.
Formation of GFG by combining 5 global entities could be a masterstroke
Mr Praveen Sinha
Founder and MD, Jabong
We can rely on common

sourcing, outstanding IT
competencies, and our
experience with private
labels.
Jabongs investors recently announced the entering into a definitive agreement to

combine five leading fashion e-commerce businesses, namely Dafiti (Latin America),
Jabong (India), Lamoda (Russia & CIS), Namshi (Middle East) and Zalora (South East
Asia & Australia) to create a new global fashion e-commerce group (GFG). GFG will
operate across the five continents with a focus on growth markets, covering 23
countries with a EUR330b fashion market and population of over 2.5b people who
continue to move rapidly online and purchase via e-commerce. GFG will market a
wide assortment of leading international apparel and accessories brands, a tailored
selection of engaging internally developed brands, and local assortments developed
for specific ethnic markets, notably India, Indonesia, and the Middle East.
As at June 2014, GFG had 4.6m active customers and over 7,000 employees. For the
first six months of 2014, GFG websites had 353m unique visitors, received 8.4m
orders, and generated EUR436m of gross merchandise volume (GMV). In 2013,
GFGs IFRS revenues amounted to EUR406m.
In the intensely competed e-commerce space, especially in markets like India, the
move comes across as a potential masterstroke to gain an edge over competition,
with the following potential synergies that seem possible from the move:
The sourcing advantage: Combined, there is greater likelihood of attracting
more global brands to the platform. As opposed to providing brands entry into
the Indian market alone, the proposition now is of facilitating access to multiple
global markets, each offering rich potential for growth. It also plays to GFGs
advantage as far as its bargaining power with existing brands is concerned. GFG
will be a buyer of significant magnitude, and the volumes lend an opportunity to
negotiate the best price. The access to a wide market provides a strong platform
to sell its private labels too.
November 2014
43
Access to global talent pool: GFG becomes an attractive proposition for the best
talent in the industry, offering the prospect to ply their trade on a truly global
platform.
Access to funds: Investors behind the creation of this group have bet big and
invested hundreds of million dollars across the five companies. The entity is
already multi-billion dollar in terms of valuation (going by the valuation implied
in last funding rounds of individual companies), and will attract the biggest
funds, should there arise a need for capital in the future.
Sharing of a strong base platform: The combination will accelerate
development of technology platforms, with a common core more advanced
than peers.
Cross learning: The move will enhance capabilities and improve competencies
through cross learning across businesses, while reaping the benefits from
economies of scale.
Strong focus on mobile platform to extend its reach, sustain leadership
November 2014
Tier-2 and tier-3 cities are underserved by traditional retail. E-tailers are poised
to tap the pent-up demand in these cities. Internet on the mobile is increasingly
acting as a channel for driving greater demand from these regions v/s tier-I
cities, which is already the case today.
Jabong launched native apps across all smartphone platforms, Android, iOS,
Windows Phone, and tablets. It is the fashion e-tailer to build a native
experience for the windows phone. Its Android app garnered 20,000 downloads
in the first three hours of launch. The app now is close to 5m downloads. The
iOS app saw a similar uptake, when the app was featured in the App store,
becoming one of the only e-commerce apps to be featured by iOS.
44
Payment mode: COD here to stay

Credit card
penetration
is low
Building
the trust
factor
Prevalence of
black money
As far as payments are concerned, cash-on-delivery (COD), a model innovated for

the Indian mass, has seen impressive acceptance and drove 60% of sales in 2013.
While other modes may pick up over time, COD is likely to continue playing a key
role as a preferred mode of payment for online transactions in the Indian ecommerce landscape. We believe there are multiple reasons for this:
Credit card penetration is low: In August 2012, former Reserve Bank of India
governor, D Subbarao noted that in comparison to other emerging markets such
as Brazil, Mexico, and Russia, at 12% of GDP, the value of banknotes and coins in
circulation in India is high. The number of non-cash transactions per person in
India is six per year, lower than in other emerging economies. Many cardholders
avoid paying with plastic because of security concerns.
Prevalence of black money: Another reason for the popularity of COD is black
money. People prefer to use cash for high value transactions. Many want to pay
by cash in tier-II areas. Aspirational purchases are a trigger for COD.
Building the trust factor: E-commerce companies also use COD to build trust. Ecommerce is young in India, and COD bridges the gap between online and brickand-mortar retail, by allowing consumers to touch and feel the product before
they pay up.
Exhibit 75: Transaction value of cards remains relatively

low in India
Source: RBI, MOSL
Source: RBI, MOSL
However, with order values increasing, the trend is being corroborated by an uptick
in EMI as a mode of payment. A relatively new concept in India, third-party wallet
offers a strong value proposition and could quickly become popular.
November 2014
45
SECTION-V
Allied industries stand to benefit in equal measure

Coupons I Digital ads I Logistics, warehouses and payment gateways
According to industry estimates, for every INR100 spent towards e-commerce,

~INR35 is spent towards accompanying services. The surge in e-commerce
spells abundant opportunity for companies involved in the enabling ecosystem
third-party logistics, warehouses, and payments.
Equal beneficiaries will be segments like digital coupons and digital
advertising. Digital marketing coupons could be a huge market, especially
outside tier-I cities, as witnessed in China and in Mydalas early success.
Given the nascent stage in India, many e-commerce players have adopted the
do-it-yourself approach towards logistics, warehouses, and even payments. As
the industry matures, these activities are likely to be outsourced.
Allied and Ecosystem

Online coupons / discount marketing | Digital advertising / content | Logistics, warehouses and payment gateways
Online coupons /
discount marketing
Digital advertising
/ content
Travel Logistics,
warehouses
and payment gateways
November 2014
46
Online coupons / discount marketing

Online coupons / discount marketing is a flourishing global industry, with multiple
USD1b+ value companies in the US, and the Chinese market pegged to be even
bigger. Value proposition to SMBs, especially in tier-II-IV cities, surging mobile
internet population, and lack of any other platform for effective marketing are all
significant drivers. Mydala leads the segment, with its hyper local marketing
platform, reach in over 200 cities, and focus on lower-tier cities.
Players: Mydala, Groupon, Freekaamaal, Coupondunia, CupoNation
Online coupon / discount
marketing segment has
flourished alongside the
surge in e-commerce in
both US and China
The business
Online group buying refers to a group of people who want to buy the same
product or service and come together through a group buying website to
achieve certain discounts. Independent third-party group buying websites act as
the middlemen between companies and customers.
Deals sites make money either through a fixed commission for every sale or by
getting a percentage cut from the merchants. Physical establishments such as
spas, hotels and restaurants are also turning to deals websites to reach a wide
customer base without any upfront payment for advertisement.
Group buying or online coupons: A flourishing global market
In the US, Groupons gross billings in 2013 were USD2.85b, and considering its
market share, it pegs the size of the industry slightly below USD6b. Groupon
enjoys a valuation of USD4.5b+, and there exist another five companies with
over a billion dollar in market cap. In addition to these, there are another 7-8
large players that are not listed.
Exhibit 76: Groupon revenue and gross billings growth
November 2014
47
Chinas third-party group buying industry reached USD5.8b in CY13, growing at a

CAGR of 80% over 2011-13. Like e-tailing, the coupons / discount marketing
segment in China is bigger than that in the US. A handful of players, led by
Juhuasuan (33.6% share) and Meituan (17.8% market share) dominate.
Meituan.com, a Chinese group discount website backed by Alibaba Group
Holding Limited, is considering a US IPO. The company offers discounts similar to
Groupon, expects to more than double transactions to USD6.4b this year
(USD2.6b last year). Revenue should triple to ~USD300m.
and also impacting USD55b-60b sales in India

Sales, even in the physical
market in India, are heavily
discounted, making a case
for online coupon industry
~7% of the total retail sales in India are impacted by coupons, pegging the goods
impacted by coupons at USD42b. Besides, discounted offerings on services such
as cabs, salon / wellness, hotels and restaurants constitute ~15% of the
industrys sales, pegging that at another USD11b+. The overall retail and
consumer services industry targeted by coupons stands at ~USD53b.
Typically, sellers spend 7-15% towards the cost of marketing discounts /
promotions. If we peg the same at ~10%, the effective addressable market for
discount marketing platforms today is ~USD5.5b.
Proliferating due to mobile internet and value proposition to SMBs
November 2014
Globally, the major driver for the scale in the industry segment is the value
proposition for the small and medium businesses (SMBs), for whom RoI of
marketing efforts is paramount to the choice of channel.
Indias growing internet population is increasingly going online to scout for
discounts for almost everything from baby diapers and television sets to body
massages and five star hotel stays. E-coupons are gaining traction as they can be
easily targeted and are cheaper compared to distributing physical coupons.
As the usage of smartphones increases rapidly, couponing as an activity should
gain much more traction.
In China, tier-3 and 4 cities account for 53.5% of total market share. Tier-2 cities
account for a further 22.67% of the national total market.
48
Findings of a study by Forrester on impact of online coupons
Online coupons and promotion codes drive incremental business.

Online coupons and promotion codes positively influence the purchase cycle.
Visitors to coupon websites are an especially valuable segment of shoppers.
Customers continue to believe that coupons do not dilute brand perceptions; in
fact, they strengthen loyalty.
The two problems facing localized SMBs today in their discount promotions are:
1. Reach: Lack of an effective medium, with the plausible options being pamphlets
or newspapers being circulated locally
2. Relatively lower RoI on the invested efforts
Online discount marketing sites are an effective answer to both the problems:
1. If powered through mobile, the use of information specific to individuals can
help target the right individual for the message, solving the problem of reach
2. Also, by sharing a small commission of the sale made through the online
platform, the costs of such marketing are truly variabilized, ensuring higher RoI
Published numbers
Mydala sells 150,000+ coupons daily.

It is estimated that deals sites contribute 10-15% of e-commerce traffic in India.
This is expected to increase to 30-35%.
Groupon India stated it sells a voucher every 23 seconds.
Freekaamaal gets close to 3,500 transactions per day worth INR3m-5m
(USD49,000-82,000).
Mydala unique provider of a channel for discount marketing
Mr Arjun Basu
Founder, Mydala
Low cost customer

acquisition for local
merchants through a
hyper local mobile-focused
targeted advertising
approach has been
Mydala's USP
November 2014
Mydala is the largest platform for SMEs and brands to market their discounts
and promotions in India. It has partnered with over 120,000 merchants across
200+ cities. Offers reach 35m unique users monthly through the internet,
mobile devices, and TV.
It provides small businesses and national/international brands with a
comprehensive hyper local marketing platform, allowing them to reach their
target audience through attractive deals, innovative branding, visibility, and
promotional campaigns.
It has tie-ups with major telecom service providers like Vodafone, Idea, and Tata
DOCOMO by offering couponing and loyalty services on their network. These
coupons are based on the user's dynamic usage pattern, location, mobile
credit/bill, and buying preferences.
Largest play on coupon / discount marketing, expect continued leadership

Today, Mydala is the sole player in India offering such services in more than 200
cities. It clocks a monthly GMV estimated at ~INR3b, and 150k+ transactions per
day. We see Mydala continuing to consolidate its leadership position in the market,
giving it significant reach in segments like FMCG and BFSI:
Any FMCG player looking to promote and market-test a new product in a
specific territory has limited options to communicate the promotional offer,
with the exception of display outside areas with large footfalls of targeted
49
Mydala provides the best

option for SMEs that wish
to market to a limited
target audience, based on
market segmentation of
location and spending
power
audience. Mydalas hyper local mobile-focused approach enables it to target

specific customer segments that an advertiser wishes to reach. It is able to
deliver advertisement material to people with a particular prepaid balance
within a particular location.
Within BFSI too, Mydala is helping to increase transactions from clients credit
cards. Information on which outlets have offers for a particular banks credit
card is limited. Such information can be pushed to credit card holders through
Mydalas analytics engine.
Focus on tier-II, III, IV cities should prove to be rewarding

While Groupon is another large name, it is more oriented towards tier-I cities.
Mydala has a wide reach across the masses in tier-II and tier-III cities. It has
presence in over 200 cities, offering extensive reach. We believe that Mydalas
approach of focusing on lower tier cities will prove to be rewarding; such cities
could see disproportionately higher demand compared to the metros.
Tier-III and IV cities account for 53.5% of the total market share in digital
coupons. Tier-II cities account for a further 22.67% of the total national market,
while tier-I cities account for ~20%.
Exhibit 77: Smaller cities dominate share in digital coupons in China
Source: daxueconsulting.com
November 2014
50
Digital advertising
Increasing penetration of the internet is driving digital advertising in India. India is
the fourth largest audience of searchers in the world and the online advertising
market in India was estimated at INR2b in FY14. Digital advertising is growing at a
CAGR of 31%, making it the fastest growing segment in Indian media.
Fastest growing ad media

Digital media advertising revenue in 2013 was estimated at INR25.2b (~USD405m),
up 30% from INR19.4b in 2012, according to the annual advertising expenditure
report from GroupM. Digital contributed 6.5% of the total media advertising
expenditure in 2013, up from 5.5% in 2012. Digital media advertising revenue is
estimated to reach INR34b (USD546m) in 2014, up 35%. This will represent 7.9% of
the total media advertising expenditure in 2014, which is estimated at INR431b.
Greater internet penetration has been the single largest driver of this trend, with
India set to be the second-largest internet population, globally.
Exhibit 78: India to be second-largest internet population globally
Source: IAMAI, Internet World Stats, Comscore
Exhibit 79: Ad revenue in India by media

INR b
2011
2012
2013
2014
2015
Print
139
154
172
193
215
241
11.5
TV
116
130
148
170
197
230
14.7
Out-of-home
18
20
22
24
26
29
10.0
Digital
15
20
26
34
44
57
29.9
12
13
16
20
24
30
20.7
Radio
2016 CAGR (%)
Source: Indian Online Advertising revenues Forecast 2014, emarketer, Magna Global
India by the numbers

130m: Current estimate of mobile internet users in India
250m: Expected number of Indian mobile internet users by 2015
861m: Total number of mobile phones in India (second-highest in the world,
behind China)
10%: Percentage of Indian mobile users, who now have smartphones
November 2014
51
Exhibit 80: Top display advertisers in India
Exhibit 81: Digital spend categories
Source: IAMAI, IMRB Report
Source: IAMAI, IMRB Report
With growth of the Indian mobile market, the mobile internet advertising segment
has also seen significant augmentation. Owing to an increase in the number of
feature phone and smartphone users, there is an upsurge in mobile internet usage
by consumers, especially from tier-II and III towns. Mobile devices being a primary
digital access point for several consumers, marketers have a range of opportunities,
particularly when it comes to reaching traditionally difficult-to-reach consumers.
Exhibit 82: Mobile internet users in India
Exhibit 83: Share of time spent on mobile
TOTAL 110 MILLION USERS
85 million
URBAN
25
million
RURAL
9/10 MOBILE INTERNET USERS ARE MEN
Source: IAMAI
November 2014
Text Messaging
45%
Social Networking
26%
Web Browsing
15%
Applications
13%
Source: Nielson Report 2013
52
Logistics, warehouses and payment gateways

Given the nascence of e-commerce in India and dominance of cash-on-delivery
(COD), many online players set up their own logistics infrastructure. Third-party
logistics providers (3PLs) have matured to the delivery mechanisms for ecommerce, and as e-commerce players attune to focusing on their core business,
growth in delivering products bought online should be disproportionate for 3PLs.
Logistics has been thwarting a burgeoning opportunity

Logistics companies will
stand to gain massively, as
the larger companies phase
out such operations in
majority cities, barring few,
over time
While e-tailing does not require the opening of physical stores to capture consumer
demand, it needs an effective website through which customers can access product
information and place orders. Once the order is placed, it passes through another
set of stakeholders who bring the ordered product to the customers doorstep.
Most e-tailers view themselves as supply chain and technology integrators who
manage a complex web of stakeholders.
Given the geographical complexity, suboptimal infrastructure and regulatory
variations across the country, logistics in India has always been challenging. It has
also been more of a B2B service; the B2C logistics ecosystem (requires customer
interaction, cash handling COD ~60% of all deliveries, and returns handling) is still
a new and underdeveloped capability for 3PLs.
Up to 90% of goods ordered online in India are moved by air, which pushes up
delivery costs by around half, according to several online retailers and logistics
companies. Road and rail transport networks remain woefully underdeveloped and
entangled in graft and bureaucracy.
Doing it on their own

Some of the more established e-tailers have invested in setting up their own
delivery networks, as: [1] this enables them to have a tangible customer
interaction through which they can get feedback and tailor services accordingly, and
[2] most 3PLs are still in the process of developing efficient and comprehensive
logistics networks.
November 2014
Flipkart created a separate brand for its logistics arm in April 2013 and has so far
used eKart only for in-house deliveries. In February 2014, it opened eKart
logistics services for other e-tail ventures too.
Amazon too is pumping up capacities at Amazon logistics. That is in addition to
existing partnerships with 3PLs like GATI, Blue Dart, and FedEx Corp. Amazon
also started a pilot project with India Post to test the system and use the
channel to collect COD payments as well. This could help it reach deep into
India's hinterland. India Post has over 150,000 post offices in India, of which
89% are in rural areas.
In 2012, Jabong helped design the process for JaVAS, a logistics solution similar
to Amazon fulfillment services so that other e-commerce players can outsource
their logistics to Jabong on a contract basis.
53
India has ~21,000 pin codes and most 3PL players are able to reach 8,000-10,000 pin
codes at best. India Post, with its formidable network across urban and rural India,
and its already established mechanism to handle money orders, can harness this
opportunity in a big way.
As per research by TechnoPak, case studies of the US Postal Service (US) and
Deutsche Post (Germany) demonstrate that these organizations have attempted to
remain relevant in the changing times by tapping into and benefiting from the
growth of e-tailing in their respective countries. Both the organizations are
significant in delivering parcels to e-tailing customers.
Exhibit 84: Share of revenues from e-commerce is significant
US Postal Services, US (15%)
Source: Company Reports, Secondary Sources
Exhibit 85:
Deutsche Post , Germany (41%)
Source: Company Reports, Secondary Sources
EXPERT SPEAK: Mr Sanjiv Kathuria, Director & CEO, DotZot

Simply put, growth in logistics will be as exponential as e-commerce
Launched in mid-2013, DotZoT is the first pan India delivery network, focused
exclusively on the e-commerce/e-retail space. It is backed by DTDC's size, scale
and reach, and covers 8,000 plus pin codes and 2,300 cities across India.
DotZot aims to bridge the gap faced in logistics infrastructure by providing
superior logistics solutions to e-tailers, who are increasingly looking to enhance
customer shopping experience. DotZot ensures constant visibility of shipments
and real-time flow of information. It offers superior value and reliability to eretailers.
Massive opportunity
There is no e-tail without delivery. Delivery at the doorstep is a pre-requisite.
Logistics requirement for e-commerce will grow as exponentially as e-commerce.
Sizing the market today: The current market size of e-tail in India is estimated at
USD3b. If the average shipment value is of INR2,000, that puts the number of
shipments per year at 90m. E-tailers cater to ~50% of the shipment deliveries on
their own. 90m annual e-commerce-driven shipments as explained above imply
0.3m deliveries per day only for e-commerce parcels even today. That implies
~0.15m daily shipments of 4.5m annual shipments through 3PLs (assuming 50% is
catered to by the platform owners themselves). This pegs the overall cost of
November 2014
54
delivering the e-commerce parcels at INR8b-9b, out of which the revenue

opportunity for 3PLs in e-commerce delivery alone is INR4b-5b.
Why growth should surpass growth in e-commerce: Traditionally, documents have
comprised 75-80% of the volumes for the courier market in India. E-commerce
deliveries are changing this scenario, as every shipment to be delivered in ecommerce is a parcel. 1m+ per day of ~1kg per parcel implies huge tonnage for the
market from e-commerce alone. Platform owners like Flipkart and Amazon are likely
focusing on the bigger cities, where density is high. However, increasingly the
growth opportunity in e-tailing is tilting towards smaller cities and tier-III/IV towns.
This implies that the play for even 3PLs is massive. The USD3b market is likely to
grow multi-fold, and daily shipments from e-commerce alone should easily reach
1m in a few years.
Greater share for 3PLs over time

Cost of delivery for e-commerce companies is huge at 8-10%. This is centered on
brand-building and giving customers an excellent delivery experience. However, as
profitability assumes greater importance, there will be greater propensity to
outsource functions like logistics to specialist players. They may not phase it out
entirely, given the investments in the platform, but may start pruning their
networks. They may restrict themselves to select cities with the highest density.
Also, managing day-to-day aspects of the logistics business at higher scale may be a
problem take for example, managing attrition across thousands of delivery boys
needed to deliver 1m+ parcels every day.
Why separate focus on e-commerce

An increasing number of e-tailers are shifting to the marketplace model. Parcels are
being picked up from sellers located all over. This requires a different piece of
technology and control on the pick-up process.
Once the parcel reaches the destination, there is a requirement for a parcel network
for residences earlier only documents got majorly delivered at residences. COD
adds to the complexity, making logistics a quasi cash management service. For
DotZot, the COD remittance cycle post delivery is down from 15-20 days a year ago
to less than 7.
Secondly, the return-to-origin percentage is also in double-digits; parcels have to be
delivered back to the originating merchants. E-commerce also demands reverse
pick-up of exchange and returned shipments in large numbers, and that is also a
change that logistics companies have adapted to.
DotZots advantage lies in pre-established DTDC network that it can use

The pre-requisite for rolling out any delivery service is setting up a network. It is also
the biggest cost and takes several years to have a pan-country network. DotZot
comes with an established network and the largest pan-India network outside of
India Post, through DTDC. DotZot will ride on that network rather than duplicating
the network. This not only makes the business viable right from the beginning it also
allows DotZot to offer a country-wide delivery service from day-1.
November 2014
55
The costs incurred in setting up of shipment network are significant. Also, many of
such networks that exist in the smaller cities may end up becoming cost centers,
where deliveries of products happen from higher tier cities, and the reverse traffic is
virtually non-existent. However, that is not a significant concern for DotZot, given
DTDCs already established network that it can ride on.
Warehousing: Potential shot in the arm of land owners, at last

E-commerce has given a fresh lease of life to hundreds of land owners. They bought
land to build warehouses a few years ago but were disappointed after a muchtouted policy of FDI in multi-brand retail became a non-starter.
While Amazon is planning to lease over a million square feet of warehousing space
within this calendar year to set up what it calls fulfillment centers, Flipkart has
recently leased 500,000sf of space across the country and is fitting them out to
commission before this Diwali.
Exhibit 86: Demand for warehousing will be significant as the scale of goods shipped
multiples
Source: Economic times
Chinas surge in demand for warehouses is a case in point

How e-commerce has driven a surge in demand for warehouses is aptly explained
through the China scenario. To cope with the China surge, as much as USD2.5t may
be needed to invest in buying land and constructing warehouses alone over the next
decade-and-a-half, according to a realty developer.
"Over the next 15 to 20 years, the real cost of building warehouses is going to be
staggering," says Jeff Schwarz, Co-founder of Global Logistic Properties Limited
(GLP), the biggest foreign builder of logistics facilities in China.
With each new facility being the size of several large sports stadiums, it translates to
~2.4b square meters of new warehouses, an area close to two-thirds of the total
land mass of Taiwan. GLP estimates that the USD2.5t needed over the next 15 years
will only increase the per capita fully automated modern warehouse space to just a
third of that of the US. Alibaba controls 80% of the entire online retail in China and
its logistics partners delivered 5b packages last year from deals struck on its internet
marketplaces.
November 2014
56
Payment gateways will see increased transactions

While some companies have tinkered with the idea of launching their own payment
gateways (famous example being Flipkarts PayZippy), most have partnered with
select payment gateway service providers. A little over a year since it launched its
payment gateway business, Payzippy, Flipkart is phasing it out. It has made a
strategic investment in mobile payment company, Ngpay.
EXPERT SPEAK: Mr Nitin Gupta, Co-founder and CEO, PayU India

The choice of a payment gateway provider is based on four parameters:
Range of payment options: Multiple-company credit/debit cards, net banking,
cash cards, EMI, mWallets, etc.
Technology: Technology deals with multiple facets. Factors important to a
merchant in choosing a payment gateway are better conversion rates, faster
transaction completion, better end-user experience, and more analytics.
Quality of service: Payment gateway providers are partners to their merchants
on an ongoing basis, providing support and maintenance. There are instances
when problems occur in the services at various levels; the teams
responsiveness and quality of service is a factor.
Pricing: Payment gateways charge a take rate on every transaction, which is
called transaction discount rate or TDR.
Size and growth of payment gateway market
The entire payments market is much higher than the e-commerce market and
pegged at USD30b today.
Total revenue opportunity from USD30b of payment market is ~1%, which
translates to ~USD300m.
The payment market is growing in early double digits (10-15% YoY). E-commerce
is growing very fast, but the other segments are not.
While there are more people on the internet, a limited percentage transact
online.
Payment service providers

PayU India
CCAvenue
Ngpay
Citrus
EBS
DirecPay
ZaakPay
November 2014
57
Companies
E-tailing | Classifieds | Travel | Allied & Ecosystem
E-tailing
Classified
Travel
Allied &
Ecosystem
Digital
Content
November 2014
58
Initiating Coverage
| Sector:
Technology
Thematic
| E-commerce
Info Edge
S&P CNX
8,3244
BSE Sensex
27,860
CMP: INR854
TP: INR1100
Buy
Cementing early mover advantage with scale

Preferred play on digital commerce, given network effect
Stock Info
Bloomberg
INFO IN
Equity Shares (m)

52-Week Range
113.8
976 / 377
1,6,12 Rel. Perf. (%)
-6/28/88
M.Cap. (INR b)
97.2
M.Cap. (USD b)
1.6
Financial Snapshot (INR b)

Y/E Mar
2015E 2016E 2017E
6.1
7.3
8.7
Sales
PAT
1.8
2.5
3.1
EPS (INR)
15.0
20.9
25.7
EPS Gr. (%)
27.1
39.6
23.1
BV/Sh. (INR)
138.6
154.7 173.8
RoE (%)
14.8
14.2
15.6
RoCE (%)
14.8
13.3
15.5
P/E (x)
57.1
40.9
33.2
EV/EBITDA (x)
47.9
36.0
27.1
EV/Sales (x)
15.6
12.8
10.3
Shareholding pattern (%)

As on
Sep-14
Promoter
44.5
DII
14.4
FII
31.2
Others
9.9
Jun-14 Sep-13
44.5
52.2
14.4
11.4
31.3
30.8
9.9
5.6
Note: FII Includes depository receipts
Info Edge India

Sensex - Rebased
775
625
475
Revival of GDP growth to help flagship recruitment segment: INFOEs

recruitment business has a strong correlation with GDP growth, which has been
substantiated in the past linkage of the recruitment portals revenues with GDP.
Given the revival in the economy, its recruitment portal, Naukri.com, which
enjoys clear market leadership, should benefit from the growth revival. Healthy
demand for IT Services has led to pick-up in IT hiring, which too should benefit
the segment. We expect revenue CAGR of 16% over FY14-17 in flagship
Naukri.coms revenues. We expect 99acres.com to continue doing well too, and
expect revenue CAGR of 33% over FY14-17 on a small base.
Oct-14
Jul-14
Apr-14
Jan-14
Oct-13
325
November 2014
Using network effect to its advantage: With all enablers falling in place, the ecommerce industry is set to witness exponential growth over the next decade.
INFOE has had an early lead in the classifieds business, which is dominated by
recruitment, real estate, and matrimony. In addition, it continues to invest in
other assets, some of which are leaders in their domain notably Zomato.com
and Mydala.com. Management understanding of internet businesses is not only
driving INFOEs in-house businesses, but also helping identify and invest in
potential winning models at very early stages in their life cycle.
Direct and high quality play on exploding e-commerce opportunity; Buy: We

value the company using SOTP valuation method. While recruitment business
remains the cash cow, we see the real estate portal, 99acres.com, along with
holdings in restaurants classifieds, Zomato.com, and online coupons and
discount marketing platform, Mydala.com, driving significant value for the
company, going forward. Recruitment contributes ~50% to our target price of
INR1,100. We see INFOE as a direct and preferred play on the fast expanding ecommerce opportunity, and initiate coverage with a Buy rating.
Stock Performance (1-year)
925
Early entrant into Indian online industry: Info Edge (INFOE) is in the business of
creating and developing domain-specific communities and information
exchanges on the World Wide Web. It owns and manages Indias premier job
portal (Naukri.com), third-largest matrimonial portal (Jeevansathi.com), leading
real estate portal (99acres.com), education portal (Shiksha.com), and related
services. Further, to tap into the growing Indian internet market, INFOE invests
in early-stage companies / start-up ventures. As at the end of 1QFY15, INFOE
had invested in six such ventures for a total payout of INR3.5b.
59
Story in charts
Exhibit 87: Recruitment segment dominated the standalone Exhibit 88: and is the only profit making business in the
business
group
Exhibit 89: Recruitment business is closely linked to GDP Exhibit 90: but leadership position to sustain on network
growth
effect
Recruitment revenue growth (%)
8.6
24.1
6.7
GDP Growth (%)
25.4
8.9
6.7
7.8
11.3
4.7
4.5
9.8
FY14
FY13
FY12
FY11
FY10
FY09
-7.7
Exhibit 91: Investee company details

Company
Zomato.com
Meritnation.com
Policybazaar.com
Mydala.com
Canvera.com
Happily Unmarried.com
Written off / provisioned for
Studyplaces.com
99labels.com
Floost.com
Amt. Invested
(INR m)
1441
718
325
270
571
54
45
285
26
holding
%
50
56
23
47
32
27
FY14 summary (INR m)

Revenue
EBITDA
306
-414
203
-285
1399
-461.5
13
47
31
November 2014
60
Early entrant into Indian online industry

Classifieds leader; invested in multiple leading online ventures
INFOE is one of the largest internet companies in India. It owns and manages
Naukri.com (Indias number-1 job site), Jeevansathi.com (Indias third-largest
matrimonial portal), 99acres.com (Indias number-1 real estate portal), and
Shiksha.com (Indias only established education portal).
It raised INR1.7b through an IPO in November 2006 and a further INR7.5b
through a QIP in September 2014. With its headquarters in Noida (NCR), the
company employs 3,681 people and operates through 58 offices in 42 cities in
India. ~73% of its total employees (2,680 people) are in sales/client facing roles.
INFOE is in the business of creating and developing domain-specific
communities and information exchanges on the World Wide Web. It is Indias
leading online classifieds company in recruitment, matrimony, real estate,
education and related services.
Further, to tap into the growing Indian internet market, INFOE undertakes
investments in early stage companies / start-up ventures. As at the end of
1QFY15, INFOE had invested in six such ventures for a total payout of INR3.5b.
Exhibit 92: Info Edge Evolution
November 2014
61
Businesses
From an industry perspective, INFOEs offerings can be classified into four broad
verticals in different stages of their life cycle:
Recruitment: The recruitment portal is a relatively mature business and the
primary source of revenue and profits. It comprises online recruitment
classifieds Naukri.com (Indias leading job site), and Naukrigulf.com (a job site
focused at the Middle East job market), and offline executive search,
Quadranglesearch.com.
Matrimony: This includes the matrimony portal www.jeevansaathi.com and 14
offline Jeevansaathi Match Points.
Real Estate: This comprises of online real estate classifieds www.99acres.com,
and a real estate brokerage business hived off as a separate subsidiary named
Allcheckdeals.com India Private Limited.
Education: This comprises of online education classifieds www.shiksha.com, a
marketplace that connects education seekers to providers.
Exhibit 93: Recruitments services are matured and major revenue driver for the company
In its pursuit to be an established player in the rapidly growing Indian internet

market, INFOE undertakes strategic investments in early stage companies/startup
ventures and may be evaluated as pilot initiatives.
November 2014
62
Exhibit 94: As of 30 March 2014, INFOE has made the following strategic investments
Investee Company
Active
Zomato Media Pvt. Ltd.
Applect Learning Systems Pvt Ltd.
Etechaces Marketing and Consukting Pvt Ltd.
Kinobeo Software Pvt. Ltd.
Canvera Digital Technologies Pvt Ltd.
Happily Unmarried Marketing Pvt Ltd.
Sub Total
Written off/ exited
Studyplaces, Inc.
Ninety Nine Labels Pvt Ltd.
Nogle Technologies Pvt Ltd.
Subtotal
Total
November 2014
Website
Total Amount
invested (INR m)
Approx. diluted &

converted
shareholding %
Zomato.com
Meritnation.com
Policybazaar.com
Mydala.com
Canvera.com
Happilyunmarried.com
1441
718
325
270
571
54
3379
50.0%
56.0%
23.0%
47.0%
32.0%
27.0%
Studyplaces.com
99labels.com
Floost.com
45
285
26
356
3735
13.0%
47.0%
31.0%
% of Total
38.6%
19.2%
8.7%
7.2%
15.3%
1.4%
90%
1.2%
7.6%
0.7%
10%
100%
Source: MOSL, Company
63
Using network effect to its advantage

Intent to stay competitive reflected in war chest created by recent QIP
Success driven by integration of two critical factors

1. Increased use of the internet as a medium of interaction: INFOE has been using
technology to provide superior online experience. Its portals provide effective
tools for community interaction. Leading market shares in Naukri.com and
99acres.com are testimony to its technological capabilities. This, in our opinion,
is a strong foundation for many of its portals that are still in the
incubation/development phase.
2. In-depth understanding of different domains: INFOE studies the prevailing
structures and economics of offline transactions and communities, and
leverages the understanding gained to create enhanced online solutions. Thus, it
is able to bring about a migration of offline transactions and communities to the
internet. Not only has that manifested in INFOEs in-house businesses
(Naukri.com, 99acres.com, Jeevansathi.com, Shiksha.com), but also in prudent
stake buys in other businesses.
Creating network effect imperative to success of online business

Most of the businesses INFOE operates in have strong network effects. While
barriers to entry may be few, garnering a strong network is imperative to success.
The power of the network effect only grows stronger with time, thereby making it
an effective entry barrier. In the case of Naukri.com, the more customers get views
of its interface, the better it bodes for license sales at Naukri.com as customers start
hiring. More customers imply more and more job-seekers start with Naukri.com. So,
the network effect only increases with time, unless there is a loss of share.
Exhibit 95: Naukri.coms virtuous cycle of self-sustenance
QIP states intent to match competition and sustain leadership

Fast changing customer expectations and intense competition make it imperative to
continuously invest to upgrade existing offerings and develop new ones, warranting
a constant stream of internal investments. The unparalleled pace at which start-ups
in this business are raising money has necessitated competition to match
investments or lose out on share. INFOE has historically been among the more
November 2014
64
prudent businesses when it comes to allocating capital, with a strong focus on RoI
and profitability. However, we are encouraged by the companys readiness to match
the spending prowess of its peers, to try and ward off competition and stay ahead in
the game. Its recent QIP to raise the funds highlights the very fact providing it with
a war chest, if needed, in the future.
Revival of GDP growth will help flagship recruitment segment

Success in INFOEs recruitment segment is largely a function of and is highly
sensitive to economic progress. When hiring activity sees a slowdown during any
downturn, recruitment spends are the first of the budgets that witness a cut,
directly impacting the business of Naukri.com. This is witnessed in the correlation
between GDP growth and the growth in revenues of the recruitment segment.
Indias GDP growth in FY13 and FY14 fell below 5%, and that had an impact on the
growth in revenues in INFOEs recruitment segment, as did the global meltdown in
FY09-10. With the expectations around GDP growth revival running high, the
segment again would be expected to post healthy growth rates through the up
cycle.
Exhibit 96: Growth in the recruitment segment correlated to the countrys GDP growth
Potential threat from LinkedIn.com not playing out yet

LinkedIn has managed to garner a vast number of profiles, and is the leading
website today in the professional networking space. Rich database of potential job
seekers, who can possibly reach out directly to their preferred employers through
the site, gives LinkedIn some potential to take away some market from Naukri.com.
However, LinkedIn offers a passive environment, where the member may not
necessarily be seeking a job; vis--vis the active job-seeking environment at
Naukri.com. The impact to Naukri.com is not yet visible, but will only get clearer
over time, as the formers sales efforts start bearing fruits. While we do not deny
the threat, we would also like to state here that there is a structural difference
between the two models and the two may not be strictly comparable. On the
contrary, they may be complementary. The database of professionals at LinkedIn
will be more suited to search for senior talent, which we believe is only a small
proportion of Naukri.coms job seekers.
November 2014
65
Initiating coverage with a Buy rating

Direct and high quality play on the exploding e-commerce opportunity
We adopt sum-of-the-parts (SOTP) methodology to value INFOE. We have valued
the following entities separately to arrive at our target price: [1] Naukri.com
(recruitment segment), [2] 99acres.com (real estate), [3] Zomato.com, [4]
Meritnation.com, [5] Mydala.com, [6] Jeevanthi.com, and [7] Canvera.com.
While the recruitment business remains the cash cow, we see the real estate portal
(99acres.com), along with holdings in restaurants classifieds (Zomato.com), and
online coupons and discount marketing platform (Mydala.com) driving significant
value for the company, going forward. Recruitment contributes ~50% to our target
price of INR1,100. We see INFOE as a direct and preferred play on the fast
expanding e-commerce opportunity, and initiate coverage with a Buy rating.
Exhibit 97: SOTP valuation for INFOE
Segment
Methodology
Methodology
description
Valuation
(INR b)
Contribution
(INR per share)
Naukri
20x forward earnings
We treat INFOE's forward standalone earnings to be coming

entirely from Naukri. Though in reality, more than 100% if
earnings is recruitment as other segments are making losses.
We value the earnings at 20x
68.4
570
99acres.com
14x forward sales
Median sales multiple of peers such as rightmove.co.uk,

realestate.com.au, zillow.com, zoopla.co.uk
All trade in a tight sales band of 10-13x
Growth in 99acres.com is expected to be higher than peers
24.6
205
Zomato.com
15.6
130
Meritnation
Assumed at USD500m Talks are on of Zomato raising next round of funding, valuing
the company anywhere between USD500 million to USD1
billion
Valuation ascribed in Meritnation raised INR100m from INFOE, which increased
the latest round of
the company's stake in FY13 from 54% to 55.81%
funding
This implies valuation of INR6b, of which 55.81% is ascribed
to INFOE
3.1
26
Mydala.com
3x forward sales
3.8
32
Jeevansathi.com
3x forward sales
1.6
14
Canvera
Valuation ascribed in
the latest round of
funding
1.0
12.9
107
1092
Cash On books
Total
Based on strong growth prospects, and already INR3b

monthly GMV, we estimate Mydala's revenue at USD40m by
FY17
While the company could easily enjoy a multiple on the
higher side, we ascribe 3x forward sales.
INFOE's 46% ownership in the same implies valuation
contribution of INR3.3b
JS is the 3rd biggest player in the online matrimony market.
We assume 15% CAGR in revenues and value the franchise
at 3x forward revenues
Canvera raised INR45m from INFOE in latest round of
funding, which increased INFOE's stake from 23% to26%,
effectively pegging the company's value at INR1500m
Source: MOSL
November 2014
66
Financials and valuations
November 2014
Income Statement
Y/E March
Sales
Change (%)
Employee benefit expense
Advertising and promotion cost
Other expense
EBITDA
% of Net Sales
Depreciation
Interest
Other Income
PBT
Tax
Rate (%)
Reported PAT
Extraordinary Items
Adjusted PAT
Change (%)
2012
3,771
28.3
1,370
516
442
1,442
38.3
77
20
395
1,740
511
29.3
1,230
0
1,230
46.4
2013
4,372
16.0
1,672
577
626
1,498
34.3
94
25
465
1,844
528
28.7
1,315
-293
1,022
-16.9
2014
5,059
15.7
1,968
662
761
1,668
33.0
174
51
432
1,876
591
31.5
1,285
0
1,285
25.7
2015E
6,080
20.2
2,436
778
883
1,982
32.6
189
14
797
2,575
781
30.3
1,794
0
1,794
39.6
(INR Million)
2016E
2017E
7,262
8,717
19.4
20.0
2,779
3,149
890
1,068
1,021
1,184
2,573
3,317
35.4
38.1
227
266
0
0
1,244
1,367
3,591
4,419
1,087
1,337
30.3
30.3
2,504
3,081
0
0
2,504
3,081
39.6
23.1
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Loans
Capital Employed
Gross Block
Less : Depreciation
Net Block
CWIP
Investments
Curr. Assets
Current Investments
Debtors
Cash & Bank Balance
Loans & Advances
Other Current Assets
Current Liab. & Prov
Current Liabilities
Provisions
Net Current Assets
Application of Funds
2012
546
5,198
5,744
2.8
5,747
908
376
531
94
3,666
3,183
0
36
2,985
62
99
1,728
1,496
231
1,456
5,747
2013
1,092
5,563
6,654
4.8
6,659
1,378
471
908
98
3,233
4,267
1,293
45
2,710
103
117
1,847
1,606
241
2,420
6,659
2014
1,092
6,530
7,622
4.4
7,626
1,501
645
857
95
3,775
5,088
2,531
50
2,311
69
127
2,189
1,865
324
2,899
7,626
2015E
1,199
15,424
16,623
4.7
16,628
1,731
834
897
98
3,882
14,139
10,173
71
3,542
201
153
2,388
2,283
105
11,751
16,628
(INR Million)
2016E
2017E
1,199
1,199
17,352
19,642
18,551
20,841
4.7
4.7
18,556
20,846
2,051
2,391
1,061
1,327
990
1,064
98
98
3,882
3,882
16,441
19,203
10,173
10,173
85
102
5,790
8,487
242
290
151
151
2,855
3,402
2,750
3,297
105
105
13,586
15,801
18,556
20,846
67

Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout % (excl.div.taxes)
Valuation (x)
P/E
Cash P/E
EV/EBITDA
EV/Sales
Price/Book Value
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
Turnover Ratios
Debtors (Days)
Fixed Asset Turnover (x)
2013
2014
2015E
2016E
2017E
11.3
12.0
52.6
1.0
10.4
12.0
12.9
60.9
1.0
9.7
11.8
13.4
69.8
2.5
23.4
15.0
16.5
138.6
3.0
24.1
20.9
22.8
154.7
4.0
23.0
25.7
27.9
173.8
5.5
25.7
72.6
63.9
52.3
17.2
12.2
0.0
57.1
51.6
47.9
15.6
6.2
0.0
40.9
37.5
36.0
12.8
5.5
0.0
33.2
30.6
27.1
10.3
4.9
0.0
23.7
26.3
21.2
22.6
18.0
20.9
14.8
14.8
14.2
13.3
15.6
15.5
3
6.0
4
4.3
4
5.3
4
6.1
4
6.7
4
7.5
2012
2013
2014
2015E
(INR Million)
2016E
2017E
CF from Operations
874
964
1,108
1,178
1,486
1,980
Cash for Working Capital
385
39
261
230
413
482
1,259
1,003
1,368
1,408
1,899
2,462
Cash Flow Statement

Y/E March
Net Operating CF
Net Purchase of FA
-1,103
-2,012
-1,024
-231
-320
-340
Net Purchase of Invest.
517
988
-7,228
1,244
1,367
Net Cash from Invest.
-586
-1,024
-1,015
-7,459
924
1,027
Proceeds from Equity
-18
-36
7,513
-1
-48
-127
-255
-480
-576
-791
Cash Flow from Fin.
-49
-143
-291
7,033
-576
-791
Net Cash Flow
624
-163
62
981
2,248
2,698
2,038
2,663
2,499
2,561
3,543
5,790
624
-163
62
981
2,248
2,698
2,663
2,499
2,561
3,543
5,790
8,488
Proceeds from LTB/STB

Dividend Payments
Opening Cash Bal.

Add: Net Cash
Closing Cash Bal.
November 2014
2012
68
Update
| Sector:
Technology
Thematic
| E-commerce
Just Dial
S&P CNX
8,324
BSE Sensex
27,860
CMP: INR1,469
TP: INR1,800
Buy
Evolving into a mega e-commerce player

Leadership in local search + e-commerce presence = winning formula
Stock Info
Bloomberg
JUST IN
Equity Shares (m)
70.2
52-Week Range (INR)
1,895/954
1, 6, 12 Rel. Per (%)
-11/16/-7
M.Cap. (INR b)
102.7
M.Cap. (USD b)
1.7
Financial Snapshot (INR Million)

Y/E March
2015E 2016E 2017E
Net Sales
6,061 7,667 9,529
EBITDA
1,699 2,534 3,303
Adj PAT
1,356 1,943 2,526
EPS (INR)
19.3
27.7
36.0
Gr. (%)
12.4
43.3
30.0
BV/Sh (INR)
90.9
111.6 138.4
RoE (%)
23.1
27.4
28.8
RoCE (%)
32.6
38.5
40.6
P/E (x)
77.6
54.2
41.6
P/BV (x)
16.5
13.4
10.8
Shareholding pattern (% )
As on
Promoter
DII
FII
Others
Sep-14
Jun-14 Sep-13
33.0
33.0
33.1
4.6
4.8
6.4
26.6
35.8
25.5
36.6
21.9
38.7
Note: FII Includes depository receipts
Stock Performance (11 months)
Base business on strong growth trajectory: Just Dial (JUST) has a strong firstmover advantage among consumers seeking information on local businesses. It
has a strong database of 14.5m listings and SME database of more than 2,000
cities as on 2QFY15, significantly ahead of competitors. In terms of number of
listings, the second largest player, Askme, is 1/3 the size of JUST. We believe
JUSTs base business will continue to grow aggressively at 38% CAGR over the next
two years, driven by revival in the economic environment, leading to SMEs
increasing their ad spend. Margins in the base business will continue to expand, as
the share of voice search declines to single digits. In FY16, we expect voice
searches to account for ~5% of overall searches, while the share of internet would
be 15% and the share of mobile would be 60%.
Search Plus to drive transition into a mega e-commerce player: JUST

launched Just Dial Search Plus to leverage its existing database. Search Plus
provides services like online food delivery, groceries, wine delivery, doctors
appointments, taxi bookings, online purchases of electronics, etc. JUST has
launched 21 products in Search Plus, which has 145,000 sign-ups. The initial
response to Search Plus has been encouraging. It has recorded more than 1,000
food orders per day, 250+ doctors appointments per day, and 350+ restaurant
table bookings per day. JUST is planning to launch a plethora of products like Just
Dial Guaranteed, Just Dial Cash, Online Fashion, Online Cab Booking, etc, under
Search Plus, which we believe will take this platform to a completely different
league. The management plans to incur one-time ad spends of INR600m-700m to
create a viral impact for Search Plus. We believe Search Plus is a game-changing
move by JUST, marking its entry into e-commerce.
Making inroads to international markets: JUST has entered countries like UK,
UAE, Singapore, etc, which are virgin markets, with limited competition.
International business will not be capital intensive, as it would only have internet
and mobile as segments (voice, which is an expensive proposition, would be
absent). Further, JUST has spent less than USD0.5m towards content acquisition
for these markets, which is minimal, given huge scalability of the model. We
believe JUST is making the right inroads in building a scalable international
presence, full benefits of which will be visible in 3-5 years.
Buy with a target price of INR1,800: JUST is committed to aggressively scaling

up its Search Plus platform, and plans a mass communication program, with adspends beginning in 4QFY15 to popularize it. Base business margin accretion is
likely to be invested back to strengthen the Search Plus platform. We remain
optimistic on JUSTs leadership position in the local search business and the
synergistic presence in e-commerce through Search Plus. The stock trades at 84.9x
FY15E and 59.3x FY16E EPS. We recommend Buy, with a target price of INR1,800
(65x FY16E EPS).
November 2014
69
Story in charts
Exhibit 98: Total number of business listings
Exhibit 99: Paid campaigns as a % of total listings
No of business listings (m)
17.8
15.5
2.0
11.8
6.0
4.5
FY10
FY11
FY12
FY13
FY14
FY15E
FY16E
62
120
171
207
262
324
396
FY10
FY11
FY12
FY13
FY14
FY15E
FY16E
Exhibit 100: Premium listings continue to rise

Number of campaigns (in 000s)
22.0
21.0
Exhibit 101: Average realization per campaign to moderate
21.0
6.8
-11.1
20,276
20,885
FY12
FY13
FY14
FY10
FY11
FY12
FY13
FY14
FY15E
FY16E
Exhibit 102: Number of searches on JUST (m)

Internet
Mobile
Voice
Exhibit 103: Mobile and internet contribution increases (%)

Internet
SMS
195.4
115.9
139.1
153.0
172.9
13.6
41.9
87.0
165.3
314.1
350.0
Mobile
Voice
SMS
80
60
71.5
93.9
4.7
9.6
27.9
57.1
77.2
124.3
182.6
224.0
280.0
2009
2010
2011
2012
2013
2014
2015E 2016E
2.0
3.0
-21.1
FY11
52.1
3.0
19,686
2.4
19,219
17,999
20,246
25,668
262
207
171
Growth%
Avg. realization per campaign per year (INR)
Premium listings %
23.0
16.0
120
2.2
1.4
9.1
7.2
No of campaigns (in 000s)

Paid campaigns as % of total listings
2.4
2.3
2.2
2.1
40
20
0
November 2014
2009
2010
2011
2012
2013
2014 2015E 2016E
70

Income statement
Y/E March
Net Sales
Change (%)
EBITDA
EBITDA Margin (%)
(INR Million)
2012
2,621
42.5
672
25.7
2013
3,628
38.4
1,008
27.8
2014
4,613
27.2
1,422
30.8
2015E
6,061
31.4
1,699
28.0
2016E
7,667
26.5
2,534
33.1
2017E
9,529
24.3
3,303
34.7
Depreciation
EBIT
Interest
Other Income
Extraordinary items
90
582
0
132
0
144
864
0
135
15
173
1,249
0
400
0
189
1,510
0
400
0
237
2,297
0
440
0
295
3,008
0
550
0
PBT
Tax
Tax Rate (%)
Reported PAT
Adjusted PAT
Change (%)
713
209
29.3
504
504
70.7
984
297
30.2
687
702
39.2
1,649
443
26.8
1,206
1,206
71.8
1,910
554
29.0
1,356
1,356
12.4
2,737
794
29.0
1,943
1,943
43.3
3,558
1,032
29.0
2,526
2,526
30.0
2012
531
542
1,072
0
-9
1,063
600
251
348
12
1,568
540
0
0
237
303
1,405
1,392
13
-865
1,063
2013
695
3,564
4,259
0
9
4,269
967
359
608
16
4,858
593
0
9
239
345
1,806
1,787
18
-1,213
4,269
2014
702
4,643
5,345
0
18
5,363
1,060
532
528
0
6,257
865
0
0
370
495
2,287
2,103
184
-1,422
5,363
2015E
702
5,674
6,375
0
18
6,393
1,460
721
739
0
6,257
1,711
0
7
1,110
594
2,314
2,283
31
-603
6,393
2016E
2017E
702
702
7,128
9,004
7,830
9,705
0
0
18
18
7,848
9,724
1,860
2,260
959
1,253
902
1,007
0
0
6,257
6,257
3,157
5,366
0
0
9
12
2,435
4,499
713
856
2,468
2,907
2,428
2,855
40
52
690
2,460
7,848
9,724
E: MOSL Estimates
Balance sheet
Y/E March
Share Capital
Reserves
Net Worth
Debt
Deferred Tax
Total Capital Employed
Gross Fixed Assets
Less: Acc Depreciation
Net Fixed Assets
Capital WIP
Investments
Current Assets
Inventory
Debtors
Cash & Bank
Loans & Adv, Others
Curr Liabs & Provns
Curr. Liabilities
Provisions
Net Current Assets
Total Assets
November 2014
(INR Million)
71

Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Cash P/E
Price / Book Value
EV/Sales
EV/EBITDA
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
Turnover Ratios (%)
Fixed Asset Turnover (x)
Asset Turnover (x)
Creditors (No. of Days)
Working Cap. Turnover
Leverage Ratios (%)
Debt/Equity (x)
2012
2013
2014
2015E
2016E
2017E
9.5
11.2
16.5
0.0
0.0
10.1
12.2
61.3
0.0
0.0
17.2
19.7
76.2
2.6
13.5
19.3
22.0
90.9
5.3
24.0
27.7
31.1
111.6
7.9
25.1
36.0
40.2
138.4
10.6
25.8
157.9
133.9
90.9
40.1
156.2
0.0
148.5
123.2
24.5
28.9
104.1
0.0
87.2
76.3
19.7
22.7
73.7
0.2
77.6
68.1
16.5
17.2
61.3
0.4
54.2
48.3
13.4
13.4
40.6
0.5
41.6
37.3
10.8
10.6
30.5
0.7
49.8
70.4
26.3
37.5
25.1
34.3
23.1
32.6
27.4
38.5
28.8
40.6
4.4
2.4
193.9
-153.5
3.8
0.8
179.8
-146.1
4.4
0.9
166.4
-141.8
4.2
0.9
137.5
-103.1
4.1
1.0
115.6
-83.1
4.2
1.0
109.4
-78.1
0.0
0.0
0.0
0.0
0.0
0.0
2012
713
90
0
-209
444
-82
957
-231
-1,091
112
-1,209
293
-166
0
0
127
-125
196
71
2013
984
144
0
-307
314
-112
1,023
-361
-3,188
14
-3,535
2,513
1
0
0
2,514
2
237
239
2014
1,649
173
0
-443
340
0
1,719
-78
-1,399
0
-1,477
0
0
0
-163
-112
131
239
370
2015E
1,910
189
0
-554
-80
0
1,466
-400
0
0
-400
0
0
0
-325
-325
740
370
1,110
Cash flow statement

Y/E March
OP/(Loss) before Tax
Depreciation
Interest
Direct Taxes Paid
(Inc)/Dec in Wkg Cap
Extraordinary items (net)
CF from Op. Activity
(Inc)/Dec in FA & CWIP
(Pur)/Sale of Invt
Others
CF from Inv. Activity
Inc/(Dec) in Net Worth
Inc / (Dec) in Debt
Interest Paid
Divd Paid (incl Tax)
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Opening Balance
Closing Balance
November 2014
(INR Million)
2016E
2017E
2,737
3,558
237
295
0
0
-794
-1,032
33
294
0
0
2,214
3,115
-400
-400
0
0
0
0
-400
-400
0
0
0
0
0
0
-488
-651
-488
-651
1,325
2,064
1,110
2,435
2,435
4,499
E: MOSL Estimates
72
E-tail
Flipkart
FLIPKART
About the company
Business description
GMV data
Business scale
Investors
Funding history
Business outlook /
development
Flipkart went live in 2007 with the objective of making books easily available to anyone who
had Internet access. It is headquartered in Bangalore.
The company was founded by Mr Sachin Bansal and Mr Binny Bansal, who were colleagues at
IIT-Delhi and then at Amazon.com.
According to Alexa, Flipkart's website is one of the 10 most visited sites in India.
Legally, Flipkart is not an Indian company as it is registered in Singapore and majority of its
shareholders are foreigners.
Flipkart.com is Indias leading e-commerce marketplace, offering over 15m products cross
70+ categories, including Books, Media, Consumer Electronics and Lifestyle.
Flipkart has many firsts to its name in India: cash on delivery, 30-day replacement policy, EMI
options, free shipping.
As foreign companies are not allowed to do multi-brand e-retailing in India, Flipkart sells
goods in India through a company called WS Retail.
In March 2011, Flipkart had a run rate of USD10m. It announced plans to reach USD1b in
GMV by 2015.
Flipkart reached that milestone in February 2014 based on annualized monthly GMV.
This implied February 2014 GMV of USD83m+, (INR15b+ quarterly run rate).
Reliance Retail, India's largest retail store, had 3QFY14 revenue of INR40b.
Flipkart has a workforce of 14,000.
It has 22m registered users, clocking over 4m daily visits.
Revenue soared five-fold to more than INR11.8b in FY14, from INR2.05b in the previous year,
as per documents filed by the company with the Registrar of Companies.
Flipkart reported a loss of INR2.82b in FY13, much wider than the loss of INR1.1b in the
previous year, as it significantly raised spending to increase revenue.
Accel Partners
DST Global
GIC
ICONIQ Capital
Morgan Stanley Investment Management
Naspers
Sofina
Tiger Global
Dragoneer Investment group
Vulcan Capital
Raised USD1b in July 2014
Raised USD210m in May 2014
Raised USD200m in July 2013
Raised USD160m in October 2013
Raised USD150m in August 2012
Raised USD20m in June 2011
Raised USD10m in 2010
Raised USD1m from Accel Partners in 2009
Flipkart aims to be India's first USD100b company in the next five years.
It runs six warehouses and intends to open 50 more in the next three years.
It plans to nearly double its headcount to 26,000.
November 2014
73
Exhibit 104: Flipkart has thus far raised ~USD1.75b
Exhibit 105: High revenue growth keeps Flipkart in investment mode
November 2014
74
Jabong
JABONG
About the company
Jabong.com is an Indian fashion and lifestyle e-commerce portal.

The site started operations in January 2012. It was co-founded by Mr Praveen Sinha and Mr
Arun Chandra Mohan, and after which Ms Lakshmi Potluri, Mr Manu Jain and Mr Mukul
Bafana joined the organization.
As others gradually left to pursue varied interests, Mr Sinha and Mr Chandra Mohan remain
as the core founding team.
Jabong also has an international store called Jabongworld.com, which sells Indian ethnic wear
and western wear such as sarees, lehengas, salwar suits and dress materials, dresses and
tunics priced in foreign currencies.
Jabong.com caters to the fashion needs of men, women and kids across footwear, apparel,
jewelry and accessories.
It hugely contributed towards process design of logistics services for other merchants as a
separate service, JaVAS - short for Jabong Value Added Services. With the gradual increase of
other merchants on the platform, the independence of JaVAS is now more prominent.
Jabong last year piloted with a managed marketplace model. In this model, it does not store
vendor inventory, but follows the same quality checks and supply chain mechanisms.
In 1QCY14, 40% inventory was under marketplace, up from 31% in 1QCY13.
Jabong claims to be No. 1 in fashion and lifestyle products.
As at December 2013, Jabongs annualized GMV run rate was USD300m+, and based on the
rapid growth in the industry, it must be much higher today.
In March 2013, Jabong shipped 6,000-7,000 orders a day. During September 2013, it shipped
14,000 orders on a daily basis, of which 60% were from small towns.
In 1QCY14, company clocked 1.95m gross orders with tier II and tier III cities, almost 2/3rds of
the total.
The e-store at present carries over 1,700 brands and over 90,000 products.
Total customer base in 1QCY14 almost tripled YoY to 2.88m.
Rocket Internet
CDC (British development finance institution)
Kinnevik
Holtzbrinck-ventures
Incubated by Rocket Internet

Reportedly raised USD100m in February 2014 (including USD27.5m from CDC)
Company's focus remains on retaining leadership with high priority on growth. Main focus is
on assortment, especially in the general merchandise category.
Business scale
Some numbers
Investors
Funding history
Business outlook /
development
November 2014
75
Exhibit 106: No of styles (000)
Exhibit 107: Category mix (1QCY14)
Exhibit 108: Percentage of returning customers
Exhibit 109: Total customer base
Exhibit 110: Unique visitors
Exhibit 111: Quarterly orders
Exhibit 112: Transacting customers
Exhibit 113: Orders per customer
November 2014
76
Snapdeal
SNAPDEAL
About the company
GMV data
Business scale
Investors
Funding history
Acquisitions
Snapdeal.com is an online marketplace headquartered in New Delhi.

The company was started in February 2010 by Mr Kunal Bahl, a Wharton graduate as part of
the dual degree M&T Engineering and Business program at Penn and Mr Rohit Bansal, an
alumnus of IIT Delhi.
It started as a daily deals platform but expanded in September 2011 to be an e-commerce
company through a marketplace model.
rd
In 3 round of funding of USD50m, eBay came as the largest investor in Snapdeal. The
investment also included a commercial partnership under which eBay got access to
Snapdeals 20m registered users, logistics software and distribution network.
Snapdeal is focused on adding as many merchants as possible and providing customers with
the best marketplace on its platform.
In December 2013, Snapdeal was converging towards USD0.5b in GMV.
As per the promoter, GMV grew 500% in FY14.
In May 2014, company expressed confidence in attaining USD1b in GMV.
In June 2014, Snapdeal stated that it has achieved the milestone of 1,000 sellers on its
platform and clocked sales of over INR10m.
The latest round of funding valued Snapdeal at ~USD1b.
Company currently ships products to over 4,000 towns and cities.
It has over 20m registered users.
Company has a wide array of 4m+ listed products encompassing 6,000+ brands and 500+
categories.
Snapdeal has 1,300+ employees, which it is looking at doubling in a years time.
Having launched the mobile app less than two years ago, it also generates over 50% orders
from mobile.
Over 60% of all units sold on Snapdeal are fashion goods. About 15 months ago, it was zero.
Nexus Venture Partners
Indo-US Venture Partners
Bessemer Venture Partners
eBay
Blackrock
Temasek Holdings
Premji Invest
Kalaari Capital
Intel Capital
Saama Capital
Raised USD12m in January 2011
Raised USD45m in July 2011
Raised USD50m in March 2013
Raised USD133m in February 2014
Raised USD627m from Softbank in October 2014
In June 2010, acquired the Bangalore-based group buying site, Grabbon.com.
In April 2012, acquired esportsbuy.com, an online sports goods retailer based.
In May 2013, Snapdeal acquired Shopo.in, an online marketplace for Indian handicraft
products.
November 2014
77
Exhibit 114: Leading online marketplace in the country
Exhibit 115: With sizeable team, likely to double soon
Exhibit 116: Rate of online shopping picking up rapidly
Source: Company
Exhibit 117: Horizontal marketplace with presence in almost all categories
November 2014
78
Shopclues
SHOPCLUES
About the company
Business scale
Some numbers
ShopClues.com is an online retail website headquartered in Gurgaon, India. It is the Indian

subsidiary of Clues Network Inc, a US corporation.
The company was founded in the Silicon Valley, US in 2011 by an alumnus of Washington
University and renowned Wall Street internet analyst Mr Sandeep Aggarwal and eBays
former Global Product Head, Mr Sanjay Sethi.
LShopClues
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d website
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marketplace model.
It works on a zero inventory marketplace model where sellers can display their product
catalogues.
It operates as a generalist offering wide assortment of items including mobile phones,
laptops, tablets, electronics, home dcor, footwear, apparel, fashion accessories, books &
music etc. New product categories like Pet Supplies and Gourmet Food are also gaining
popularity.
ShopClues is aiming at GMV of INR10b by FY15, with net revenue of INR1.5b.
In FY14, it had GMV of INR3.5b and net revenue of INR455m, up from INR350m in FY12.
Company is confident of turning profitable on an operating level by June 2015.
ShopClues handles ~1.8m transactions every year. It has over 32,000 registered merchants,
200,000 products on the ShopClues platform and over 42m visitors every year across 12,000
locations in the country.
ShopClues joined as the 35th entrant in Indian e-commerce in 2011 and is reported to have
made its way to the list of top six e-commerce destinations in the country. Company employs
over 350 people across locations.
Investors
Helion Venture Partners

Nexus Venture Partners
A leading Japanese Internet company
Funding history
A total of USD15m raised so far

USD4m in September 2012
USD10m in March 2013
Business outlook /
development
The company is looking forward to handling 3m transactions and expects visitors on the
website to cross 100m.
ShopClues will launch its first-ever advertising campaign in September 2014 and has
earmarked INR750m for the same.
The aim is to have USD1b in GMV in 2016 and USD100m of net revenue, post which it will go
f
N d li i
Exhibit 118: Aims to increase GMV to USD1b by 2016
November 2014
79
Infibeam
Infibeam
About the company
Business scale
Funding history
Business outlook /
development
Infibeam is an e-commerce company headquartered in Ahmedabad.

It was founded in 2007 by Mr Vishal Mehta, a Cornell and MIT Sloan alumni. After working for
Dell Computers and Amazon.com in the US for five years, Mr Mehta returned to India in 2007
and started Infibeam along with a group of ex-Amazon employees.
He funded the company by selling his personal assets rather than opting for external equity
funding.
Infibeam.com started as an automobile portal in 2007, but later turned into an online
retailer.
Company has offices in Ahmedabad, Delhi, Mumbai and Bangalore and has a total of 1,300
employees.
Infibeam.com, the online retail website of the company, sells books, electronics and lifestyle
products.
In 2011, the company established Infibeam Logistics, its own logistics arm in major Indian
cities.
Infibeam extended its e-commerce platform to build online stores for HiDesign, TTK Prestige
and Crossword Bookstores and NDTV Shopping. In 2011, the e-commerce platform was
opened to all through Buildabazaar, which allows users to create their own web store.
In August 2013, Infibeam launched the e-commerce marketplace Dhamaal.com in association
with CCAvenues. Dhamaal has a selection of 15m products.
In February 2010, Infibeam launched Pi, an e-book reader that uses E Ink electronic paper
technology.
Infibeams strategy was described by Forbes as "that seems to defy most standard models.
Companys turnover was reported to be INR10b as of November 2013.
It broke even for the first time in FY14 and had revenue of INR3.5b.
The promoter had so far invested his own money and funds from friends and family.
In May 2014, Sony Music Entertainment acquired a strategic 26% stake in subsidiary Infibeam
Digital Entertainment Pvt Ltd (INDENT).
However, as per media reports, it will use the IPO route for raising funds in the next three
quarters, with plans to raise at least 20% of its valuation.
While the size of current team is 1,300 employees, Infibeam aspires to have 5,000 by 2015.
Company is looking to raise funds for domestic and international expansion, manpower and
infrastructure enhancement.
It forecasts ~50% growth in the coming years. Infibeam is expanding into Middle East, North
Africa and South East Asia.
Exhibit 119:
Exhibit 120:
November 2014
80
Myntra
MYNTRA
About the company
Business scale / statistics

Some numbers
Investors
Funding history
Business outlook /
development
November 2014
Myntra.com is an Indian online shopping retailer of fashion and casual lifestyle products,
headquartered in Bangalore.
It was established by Mr Mukesh Bansal in February 2007 with a vision of creating India's
largest on-demand personalization portal.
On May 22, 2014 Flipkart acquired Myntra in a deal estimated to be ~USD300m.
Myntra.com is an aggregator of many brands. Its business model is based on procuring
current season merchandise from various brands and making them available on the portal at
the same time as in respective retail brand outlets. All these products are offered to
customers on MRP.
Till FY14, Myntra had an inventory model. It disclosed its plans to roll out its marketplace
model from April 2014 (1QFY15).
From 2007 to December 2010, company was in the business of personalization of products
online. The products ranged from T-shirts, mugs, greeting cards, calendars, key chains, diaries
etc.
However, in 2010, it expanded the catalogue to retail fashion and lifestyle products.
In 2013, Myntra acquired San Francisco-based Fitiquette, a developer of virtual fitting room
technology.
Myntra's target for FY14 was to double its turnover from INR4b in FY13 to INR8b.
Myntra.com offers close to 70,000 products from more than 700 leading Indian, international
and designer brands. The portal receives over 50m hits every month and services over 9,000
pin codes across the country.
Myntra invested 8-10% of sales in brand promotion to develop the market.
Tiger Global
Kalaari
PremjiInvest
IDG Ventures
NEA-IndoUS Ventures
Accel Partners
Raised seed funding in October 2007 from Accel, Mumbai Angels and another angel investor
Raised a funding of USD5m in November 2008
Raised second round of USD14m in 2011
Raised USD20m in third round towards the end of 2011
Raised USD25m between 3Q and 4Q of 2012
Raised USD50m in February 2014
In its newly-launched marketplace, Myntra expects to have ~500 vendors signed up within
the first year of operation.
It also expects ~20% of the total business to come from the marketplace in the next one year.
81
Fashion And You

FASHIONANDYOU
About the company
Founded in 2010, Fashionandyou is one of India's leading flashsales/rivate sales websites,

offering a wide range of apparel, footwear and accessories for men, women and kids
Incubated by Harish Bahl's Smile Group, and member of the Brand Alliance - an international
group of leading private sales websites
Business expansion
Has distribution centers in Gurgaon, Surat and Bangalore
Business model
The site gives users (or 'members') access to various curated collections of Indian and Western
fashion labels and lifestyle brands at deep discounts
The company sources its own inventory from local and international distributors
80% of revenues to be targeted from flash sales, while 20% from SKUs that would be available
continuously
Pivoting to an inventory light model to minimize risk of unsold inventory
Business
Has 5.5 million registered members across 1,200 locations in India

Fashionandyou runs 15 new sales every day, and offers merchandise from 500+ brands
through limited-time events
Each flash sale event starts at 9:00 am in the morning and lasts for around 3 days
Women account for 70% of shoppers
Investors
Sequoia Capital
Smile Group
Norwest Venture Partners
Intel Capital
Nokia Growth Partners
Vipshop (Chinese discount retailer)
Funding history
Series A: Undisclosed; November 2009

Series B: USD8m; December 2010
Series C: USD40m; November 2011
Series D: USD10m; June 2014
November 2014
82
Zivame
Zivame
About the company
Founded by Ms Richa Kar in 2011 and headquartered in Bangalore, Actoserba Active

Wholesale Pvt Ltd ("Zivame") is an online retailer of lingerie
Zivame offers a selection of over 3,000 lingerie styles including bridal lingerie, plus size
lingerie, everyday wear, shapewear, lounge wear, nightwear, and swimwear.
This selection is from over 40 domestic and international brands like Hollywood Fashion
Secrets, Enamor, WonderBra, Triumph, Jockey, Amante, Bw!tch, Inaya, Hanes and Lovable
among others
Top international brands like Ultimo and Plie are now available exclusively on Zivame
Business expansion
Invest in online and offline marketing initiatives to expand reach
Business model
Zivame holds inventory for most SKUs and is able to ship them quickly. It aims to reach
INR4b in revenues by FY16
Business scale
Shows 30,000 SKUs

Registers 20,000 users ever month, 1 million unique visitors
1,200 orders a day
40% of Zivames repeat buyers purchase lingerie 4 times a year.
60% of new customers have never bought lingerie online before.
Tier 2 and 3 sales and revenues clocked In the 1st year, Zivame had 15% buyers from
Tier 2 & 3 cities. This number went up to 30% in the second year.
Investors
IDG Ventures
Kalaari Capital
Unilazer Ventures
Funding history
Series A: USD3m in 2012

Series B: USD6m in 2013
November 2014
83
Healthkart
HealthKart
About the company
Business expansion
Business model
Maintains own warehouses, where it stocks faster moving products

Has tied up with local pharmacies and vendors for delivery of products that it does not
stock
Recently started offline stores in some cities to play on a hybrid - offline/online sales
model
With about 50,000 transactions a month at an average spend of INR1,500-2,000, the
company is believed to be clocking monthly revenue of INR75m-100m
Currently offers more than 20,000 SKUs, which it plans to scale to 30,000 by the end of
2014
35% of traffic comes from mobile
Kae Capital
Omidyar Network
Sequoia Capital
Intel Capital
Seed round of USD1m in April 2011

Series A round of ~USD6m in January 2012
Series B round of ~USD14m in 2013
Business scale
Investors
Funding history
Headquartered in Gurgaon, Aquamarine HealthKart Pvt Limited ("HealthKart") runs the

website HealthKart.com and HealthKartPlus.com, and related apps on iOS and Android
through which consumers can compare prices for generic drugs and place orders for
products in a broad range of categories such as fitness & nutrition supplements, sports
nutrition, health devices, personal care, eye care and parenting, as well as some home
appliances as well as new categories like pet products
The company was founded by Mr Prashant Tandon and Mr Sameer Maheshwari
(Stanford/Harvard Business School graduates) in 2011
HealthKart has grown from a small team of 4 in March 2011 to strength of 100+, heading
towards their goal of becoming Indias e-health mega store
Healthkart has grown from offering management software to physicians to now directly
retailing healthcare products to consumers
In May 2012, HealthKart acquired Madeinhealth.com, a health nutrition e-store
November 2014
84
Bigbasket
BigBasket
About the company
Founded in 2011 in Bangalore by entrepreneurs who had previously founded Fabmall,

Innovative Retail Concepts Private Limited ("BigBasket.com")
Allows consumers to order online and then delivers fresh groceries and food supplies to
consumers in Bangalore, Hyderabad and Mumbai
Business expansion
Expanding to 10 large Indian cities, including Chennai, Pune, Delhi, Ahmedabad and
Chandigarh in the next few months
Business model
Try and deliver orders same day or next day using own fleet of delivery vehicles
BigBasket directly sources produce from farms and aggregators and provides clients the
farm to home experience
Business scale
BigBasket offers around 12,000 products across several categories like fruits & vegetables,
groceries & staple provisions, bread & bakery products, toiletries, branded food & nonfood products, dairy products, household provisions, confectioneries, and frozen food
such as ice creams
Currently delivers ~5,000 orders per day, with an average transaction value of INR1,600
and expects to generate GMV of INR2.5b in FY15
The company has 70,000+ customers
Investors
Ascent Capital
LionRock Capital
Zodius Capital
Helion Ventures
Funding history
Series A of USD10m in 2012

Series B of USD33m in 2014
November 2014
85
Bluestone
BlueStone
About the company
Founded in 2011 by Ms Vidya Nataraj and Mr Gaurav Singh Kushwaha

Headquartered in Bangalore, Bluestone.com sells fashionable, contemporary jewelry
online
BlueStone offers a range of jewelry under five categories, including earrings, rings,
pendants, bangles and bracelets. Various filters such as gold purity, stones, occasion
and stone colorhave been provided to help buyers select the jewelry
Early in 2014, BlueStone launched a service to allow end users to design and customize
their wedding jewelry. Designers from BlueStone exclusively design the buyer's jewelry
set to match the wedding trousseau
Business expansion
Bluestone is planning to go offline by setting up physical stores in select cities
Business model
Business scale
Investors
Bluestone has access to proprietary international designs and designers, and has its own
manufacturing unit
It also sources collections on order from other manufacturers
Bluestone offers 25,000 design and 10m choices for the customer with zero inventory
costs
Estimated revenue of INR350m in FY14
K Ganesh
Saama Capital
Kalaari Capital
Accel Partners
Ratan Tata
Funding history

November 2014
86
UrbanLadder
UrbanLadder
About the company
Business expansion
Founded in 2012 by Mr Ashish Goel and Mr Rajiv Srivatsa, and headquartered in

Bangalore Urban Ladder is an online market place for a curated range of furniture
It is currently the leader in the category
Plans to expand to 25 cities from the current 11 cities

Sources furniture from vendors in Jodhpur, Jaipur as well as local cities that it delivers in
Uses own delivery team, as has previously faced problems of damaged goods through 3PL
players
Business scale
GMV of INR60m a month in March 2014

125 orders a day with a GMV of INR20,000
Investors
SAIF Partners
Kalaari Capital
Steadview Partners
Funding history
Seed Round: USD1m in 2012

Business model
November 2014
87
Travel
MakeMyTrip
Makemytrip.com
About the company
Business statistics
Recent acquisitions
Focus on Hotel business
Makemytrip (MMYT) is the largest online travel company in India. MMYT commenced
operations in 2000.
In the first five years following inception, it focused on the non-resident Indian market in
the United States, primarily servicing demand for United States to India air tickets
It started its Indian business with the launch of its Indian website in September 2005
Its services and products include air tickets, hotels, packages, rail tickets, bus tickets, car
hire and ancillary travel requirements such as facilitating access to third-party travel
insurance and visa processing.
Based on 2012 gross bookings, MMYT led the market with 47% market share
Over FY10-14, its gross bookings have grown at a CAGR of 28%, and net revenues at a
CAGR of 27.5%
3.2m+ mobile apps have been downloaded, contributing 29% of total online traffic
Air ticketing is 58% of net revenues (in FY14 and 47% in 1QFY15), and hotels is 38% in
FY14, up from 18% in FY11
November 2012, acquired 100% stake in companies comprising the Hotel Travel Group operating in Southeast Asia. Total consideration is USD25m
In November 2012, acquired 51% stake in ITC group - hotel aggregator and tour operator
in Thailand. Total consideration was USD3.2m
On February 2014, completed the acquisition of entire equity in ETB group, for a total
consideration of USD4.4m.
MMYT has a diverse hotel portfolio of 13,000 domestic lodging properties
Gross bookings and net revenues from hotels are up ~70% in 3 years to USD1.26b and
USD106m respectively
In 1QFY15, hotels were 50% of net revenues, up from 18% in FY11
Annualized transactions in 1QFY15 were 6m, compared to 3m in FY11 and 4.9m in FY14
November 2014
88
Yatra
Yatra
About the company
Acquisitions
Business scale
Investors
Funding history
Business outlook /
development
Yatra.com is Indias second largest Online Travel Agency (OTA) with a ~27% market share. It is
based in Gurgaon, founded by former Ebookers Group (UK) executives Mr Dhruv Shringi, Mr
Manish Amin and Ms Sabina Chopra in August 2006.
Besides online ticketing, Yatra is focused on further diversifying its business by growing the
hotels and holiday package business.
At present, hotel bookings constitute 15% of the business, holiday packages ~20% and flight
bookings account for the rest.
Currently, ~12% of actual sales are happening on mobile. In March 2012, Yatra.com
announced Bollywood actor Salman Khan not just as the brand ambassador for the travel
website but also as a shareholder.
In April 2014, announced as Official Travel Partner of IPL Team Rajasthan Royals.
Mobile is growing very rapidlyover 20% of the total traffic and 15% of flight bookings come
from mobile. Surge in mobile has come within the last 12 months.
Yatra is the market leader in domestic hotel bookings in India. It aims to grow the hotels and
packages net revenues to the same scale as those from air ticketing by FY16, by doubling the
domestic hotel tie-ups to 30,000 by December 2015.
Yatra.com has made three acquisitions till now: (1) ticket consolidator Travel Services
International (TSI) in October 2010, (2) global distribution system (GDS) provider,
MagicRooms.in, and (3) Indian events and entertainment portal, BuzzInTown.comall for
undisclosed amounts.
In June 2012, it announced plans to fully acquire Travelguru.com from Travelocity Global. The
acquisition of Travelguru had given Yatra access to a network of more than 6,500 hotels in
India and 72,000 hotels worldwide.
Net revenues in FY14 were ~USD50m
Total Gross Bookings through Yatra were USD800m in FY14, compared to USD1,621m
through Makemytrip.com (MMT). Out of this, gross air ticketing value was USD700m, which
compares with USD944m at MMT.
The Company has ~1,800 employees based in across India, including 900 travel consultants.
In April 2014, Yatra stated that it had reservation facility for more than 12,000 hotels in India
and over 400,000 hotels around the world.
The firm claims that it is doing 20,000 domestic tickets and 5,000 hotels and holiday packages
per day.
In April 2012, it was the second-largest online travel website in India, with 30% share of the
INR370b (USD6.1b) market for all online travel related transactions.
Company stated that it has achieved market leadership in the domestic hotels and holiday
package segment.
In April 2014, Yatra cited that it will break even in 12 months.
On the back of hotel bookings and holiday packages business, it is expecting ~40% revenue
growth in 2014-15.
IDG Ventures
Vertex (Temasek's VC arm)
Reliance Venture Asset Management
Web18 (of TV18 group)
Intel Capital
Valiant Capital Management
Yatra has so far raised USD125m in various rounds of funding
Raised USD5m in 2006
Raised an undisclosed amount from Intel Capital in 2008
Raised USD33m in April 2011
Raised USD14.5m in July 2012
Raised USD23m in April 2014
Yatra targets strategic investing of its latest round of capital in mobile technology, besides
strengthening its position in domestic hotels and packages.
In 2012, Yatra stated its ambition was to scale up the revenue to INR70b (2x).
November 2014
89
Classifieds
Bharat Matrimony
Bharat Matrimony
About the company
Business characteristics
Business segments
Business scale
Strategic initiatives
Bharat Matrimony is the world's leading online matrimony service. It has been recognized by
the Limca Book of World Records for having a record number of documented marriages
online.
Bharat Matrimony was first launched in Tamil before 2000. In 2000, it quickly launched
across all languages in India.
Presently, it exists not only in all Indian languages but has ventured into countries like Sri
Lanka, UAE, Pakistan, etc.
Bharat Matrimony has evolved from an 'Online Match' to 'Match Making' to 'Marriage
Service Provider', thus expanding its target market/opportunity size.
~70% of its lead acquisitions happen organically. Only ~30% happen through Google and
advertisements.
Bharat Matrimony is strong in the 'cow belt' (Uttar Pradesh, Haryana, Punjab, etc), but weak
in the 'MOW belt' (Madhya Pradesh, Orissa and Chhattisgarh). It plans to focus on MOW,
going forward.
It has a total user data base of 50m. Men account for 70% of registrations and women for
30%. 20m are active users, while 2.3m are paid users. Paid users have increased from 7% of
total users in 2009 to 15% currently.
To supplement online services, company has 200 offline centers that help in assisted search.
A store takes about four months to break even. Bharat Matrimony targets 400 stores in the
next 2 years.
Elite Matrimony: This caters to premium match-making for affluent families. The company
derives 5% of its revenue from this segment, where charges are up to INR50,000 per match.
Assisted Matrimony: It also offers personalized match-making at its outlets. Charges are up
to INR19,000 per match. This segment contributes ~15% of total revenue.
Regular Online Matrimony: This is the company's bread-and-butter model from where it
derives ~80% of its revenue. Charges are up to INR3,590 per subscriber.
It has ~2m active users and over 20m registered members. It was recognized by Alexa,
Traffic Estimate and Comscore as most visited matrimonial portal worldwide.
India has ~70m individuals in the marriageable age group of 20-35. Love marriages
constitute just 2% of all marriages in India. The size of online matrimonial market in India
stands at INR5b. Bharat
Matrimony has 70% market share currently. On an average, it achieves 8,000 profile
registrations per day and 1,500 marriages per day.
Company has a market share of 90% in Kerala. It is the undisputed leader in South India and
its core business enjoys 40% margin.
On an average, in each wedding, INR800,000 is spent on expenses like catering, decoration
etc. This is a large unorganized market, which the company is beginning to exploit.
Similarly, marriage return gifts are a large market that the company has ventured into. On
an average, a family spends INR50,000 towards return gifts for relatives.
'Photo Match' is a key technological innovation that Bharat Matrimony undertook. It enables
a user to upload a photograph of a celebrity with the desired profile (slim, fair etc) and find
matches accordingly.
Every year, company has been taking price hikes of 5-10% without impacting the growth of
paid subscription, substantially.
November 2014
90
Zomato
Zomato
About the company
Business expansion
Business model
Business scale
Investors
Funding history
Zomato is an online restaurant discovery guide providing information on home delivery,

dining-out, cafs and nightlife in cities of India, Brazil, Turkey, Indonesia, New Zealand, the
Philippines, South Africa, Sri Lanka, Qatar, Chile, Portugal, the United Arab Emirates and the
United Kingdom.
The website (earlier Foodiebay.com) was started by Mr Deepinder Goyal, a post graduate of
IIT Delhi. In August 2010, Info Edge invested USD1m in the business and in November 2010, it
was renamed as Zomato.com
Foodiebay officially started in July 2008 with a list of 1,200 restaurants in the Delhi National
Capital Region. This database expanded to 2,000 restaurants by end-2008. Within the next six
months, Kolkata and Mumbai were included on the website.
In September 2012, Zomato expanded to its first overseas location by launching services in
Dubai, UAE.
This was followed by quick expansion into Sri Lanka, Qatar, the United Kingdom, the
Philippines and South Africa.
Company launched its operations in Auckland and Wellington in New Zealand in July 2013
and Hamilton in December 2013.
More recently, Zomato expanded to Brazil, Turkey and Indonesia.
In July 2014, Zomato made its first acquisition of New Zealand's Menu-Mania for an
undisclosed sum.
On July 18, 2014, company announced the launch of its operations in Chile.
It makes money from the ads restaurants place on their pages. Restaurants advertise with
Zomato due to better targeting.
They can pay only to be displayed when someone is searching for a location 'Colaba' for
instance and further narrow it to be displayed only for 'take outs in Colaba'.
In November 2013, the company was averaging ~INR30m per month.
As in end-2013, the entire revenue was coming from the website and they were yet to
monetize the mobile app.
Company gets ~35% of revenue from overseas markets. Zomato's revenue increased from
INR20m in FY12 to INR306m in FY14.
EBITDA loss was INR72m in FY12 and INR414m in FY14.
Info Edge (India)
Sequoia Capital
Raised first round of USD1m in August 2010
Raised USD3.5m in September 2011
Raised USD2.5m in 2012
Raised USD10m in early 2013
Raised USD37m in November 2013
Exhibit 121: Zomato remains in investment mode, fueling growth
November 2014
91
Quikr
QUIKR.COM
About the company
Business scale
Strategic investments
/Acquisitions / Milestones
Investors
Funding history
Business outlook /
development
Quikr is one of the Indias largest online and mobile classifieds portals based in Mumbai,
India.
Mr Jibi Thomas and Mr Pranay Chulet had co-founded Quikr in 2008 as Kijiji India where Mr
Thomas was head of operations. Kijiji.in was re-branded as Quikr.com with more investors
coming in.
In July last year, Mr Thomas quit the firm to launch a digital marketing company called Web
Butter Jam.
Quikr was launched on 12 July 2008 and is currently present in 900 cities across India. Quikr
provides the local community with a platform to help them buy, sell, rent and find something
and address needs across many categories.
Quikr gets more than 30 million unique visitors a month on its website
It has presence in over 940 cities in India and operates in 13 categories and in 170 subcategories, which range from mobile phones, real estate, cars, services, jobs, entertainment,
furniture, electronics and many more.
Quikr is a large-scale, cross-category online classifieds business with more than 32 million
monthly customers and small business users in 1,000 cities.
Its consumer base primarily comes to Quikr to sell, buy, rent or find products and services
across categories such as electronics and household goods, real estate, cars, bikes and
employment, among others.
It has raised a total of ~USD200m in funding till now.
The company has three revenue streams like any other online classifieds company - premium
listings, leads generation and advertising that contribute to an estimated revenue run-rate of
USD50.
CEO had cited earlier in 2014 that Quikrs revenue had grown five times over the past 12
months.
Latest round of funding valued the firm at around USD240m.
The capital (USD60m raised in September 2014) from the latest round will be used to invest
in product development as well as to further expand its mobile business.
Tiger Global Management

Kinnevik (Swedish Private Equity)
Warburg Pincus
Ebay Inc
Nokia Growth Partners
Omidyar network
Matrix Partner India
Raised USD22m in various rounds of funding before May 2012
Raised USD90m in March 2014
Raised USD60m in September 2014
Expected to cross 100m unique users in about three to four years.
The company has said the funds raised will be used to invest in product development and
expansion of its fast-growing mobile business.
November 2014
92
People Group
People Group
About the company
Being an NRI, promoter Mr Anupam Mittal first launched Shaadi.com in the NRI market in 1996.
Later, it was expanded to cater to the pan-India market.
Makaan.com is the real estate search arm, which was launched after Shaadi.com.
Other businesses include Mauj Mobile, largely focused on mobile app aggregation.
Group divisions
People Group is made up of three companies - People Interactive, People Infocom and People
Pictures.
People Interactive is the consumer Internet arm of the group and owns the extremely
successful matrimonial portal, Shaadi.com, along with real estate site, Makaan.com, and
friendship and social networking service, Fropper.com.
Infocom is a Managed Services Provider to telecom operators, media-entertainment
companies and consumer brands. It extends services in managing these applications and
facilitating content on them through its popular brand, Mauj Mobile.
People Pictures is in media production and was founded to explore the market for new-age
Indian cinema. Flavors, an NRI cult hit released in 2005, and 99, released in 2009, are the
biggest hits of those summers.
Shaadi.com
Shaadi.com achieves 10,000 profile registrations a day. Only paid users can access contact details
of the profile they like. Average realization per paid user is INR5,000 for a usage period of three
months. To supplement online services, the company has 100 offline centers, which help in
assisted search, especially for parents looking to get their children married.
People Group's real estate portal, Maakan.com, is more focused on the C2C market, where broker
involvement is less.
Makaan.com
Mobile searches are witnessing explosive growth; People Group expects >50% contribution
from mobile, post July 2014.
Company is focusing on providing a clutter-free experience to users (no/ low
advertisements). It has been consistently striving to match users' unique requirements.
November 2014
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Allied/Parallel
Mydala
MYDALA
About the company
Not a pure deep discount

coupon site
Business characteristics
Key statistics
MyDala started its business four years ago. Currently, it has 120,000+ merchants and targets
to reach over 1m merchants in next 12 months. As at June 2014, it had 32m visitors.
MyDala has effectively been able to adopt global businesses to Indian ecosystem to turn
profitable much faster than its global pears itself. It executes 4m transactions per month and
over 25m customers have used MyDala services.
Coupons, as available on sites like Groupon, typically are branding efforts of the merchant in
which they are not necessarily making money. What Groupon thus offers are deep discounts
on the purchase of any product / service.
MyDala, on the other hand, is a platform on which the seller can market his discounts. So,
while the promotional discount is there for the taking, through MyDala, the offer reaches to
the targeted audience most effectively. For example while a restaurant may be running the
offer of discounted lunch buffet on weekdays, it may still want to reach out to MyDala to
address the communication to the localized target audience, and in return share a fee from
the sale made through MyDala.
Low cost customer acquisition for local merchants through a hyper local mobile-focused
targeted advertising approach have been MyDala's USPs
It enables brands/ retailers to distribute hyper targeted advertising based on user
demographic which includes but not limited to location, past usage, age, gender, spending
patterns, kind of device, data connection plan and host of 40 different variables. This hyper
analytics is far more targeted than a generic platform like google and facebook itself. For
example, if P&G were to generate trial purchase of customers in Bhopal living in Arera Colony,
who have prepaid connections and are data subscribers, MyDala would be the only platform
for them to do that.
MyDala earns revenues from two sources: (1) tie-ups with TSPs (~20% of revenues), and (2)
through its own website and mobile app (80% of revenues), where users downloads coupons
Merchant quality is among key risks to the business. The company needs feet on the ground
looking over the same. At any point of time it is evaluating ~15k merchants for quality
parameters.
Info Edge was among the early investors in the company. Info Edge instilled the focus on
generating profitable growth, and also towards establishing a large sales fleet on the ground.
Cost of customer acquisition is INR6 for MyDala as compared with INR300-800 for ecommerce players.
Groupon runs 1,000 deals per month while MyDala runs around 40,000 deals a month across
200 cities.
Around 80% of traffic is organic
Visitors to MyDala network: 35m per month, growing at 10% MoM
Transactions on MyDala network: 4m per month
Plans to start innovative products like live offers valid for 1 or 2 hours and expand product
lines
MyDala's biggest asset is the huge database of customers and its bigdata analytics engine
which based on user's dynamic usage pattern, location, mobile credit/bill and buying
preferences would offer the best suitable deals to the customers.
November 2014
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Exhibit 122: Mydala business
November 2014
95
Ecosystem
Pay Point India
Paypoint India
Business summary
Business statistics
Pay Point India was started in 2009, with a vision to facilitate and simplify methodologies of
making and processing payments anywhere and everywhere. The promoter defines his
business as Fast Moving Consumer Services (FMCS).
Company is a payment collection hub that facilitates collection of bills of various utility
service providers, issue of movie, transport, airline and railway tickets and recharge of
prepaid mobile phones
It accepts payments in all modes - cash, cheque, credit cards. It provides easy access to topup facility in all possible modes and anywhere across the country.
It operates on a 24x7x365 module. Pay Point operates on the vendor chain cycle. Vendors
include shopkeepers, chemists and petrol pumps in the neighborhood. Vendors issue a
receipt immediately over the counter for the payments made to them. The payment details
are sent online to the service providing companies.
Business potential is huge. Indian Railways sells 3.5b tickets annually. Every household has at
least three utilities bills to pay every month. In banking, there are numerous transfer
requirements for migrants, generating a large transactional volume.
Pay Point has a network of 6,000 distributors pan India, who execute the transactions for end
customers. Transaction processing for utility bills is pretty quick - 30 seconds as only the bar
code needs to be scanned.
Revenue stream for the business is two-fold - one from service providers and the other as
commission on sales of high margin products like air tickets.
Retailers need to put money upfront for any transaction. Hence, there is no risk of credit loss.
Money remittance has evolved to be a big business for the company, largely through
labor/migrants living in cities, who have to remit wages back home.
50% of revenue comes from financial products, 30% from utilities and 20% from mobile
recharge.
In a small district like Jawahar in Maharashtra, migrants were required to open accounts with
the State Bank of India (SBI) instantly to claim NREGA benefits. SBI itself could not open these
accounts due to capacity constraints. Pay Point opened 30,000 accounts in 45 days,
displaying the power of its reach.
November 2014
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DTDC
DTDC
Business summary
DotZot
Strategic intent
DTDC is one of the largest Indian players in the Express, Courier & Logistics Services
industry. It is also credited with pioneering the franchisee concept for the courier
industry in India and presently has the largest network in the country, with 6,500
channel partners.
DTDC's services range from domestic to international delivery, premier express, supply
chain solutions, new world retail, warehouse services etc.
Company has 281 own offices and 6,500 channel partners spread across the country. It
serves nearly 10,000 pin codes, delivering 11.5m consignments per month.
Over the years, DTDC has successfully transformed into a full scale supply chain solutions
provider, offering domestic and international express, freight, transportation, logistics
management, warehousing and distribution services.
In July 2013, GeoPost SA took 40% stake in the company. GeoPost is a leading player in
express service in Europe, ranked No. 1 in France and No. 2 in Europe. It serves 230
countries worldwide. The partnership will help DTDC to gain a larger international
footprint and enable global dominance in B2B and B2C markets.
Launched in mid-2013, DotZoT is the first pan India delivery network, focused exclusively
on the e-commerce/e-retail space. It is backed by DTDC's size, scale and reach and covers
8,000 plus pin codes and 2,300 cities across India.
DotZot aims to bridge the gap faced in logistics infrastructure by providing superior
logistics solutions to e-retailers, who are increasingly looking to enhance customer
shopping experience. DotZot ensures constant visibility of shipments and real-time flow
of information. It offers superior value and reliability to e-retailers.
DTDCs current strategy in keeping with its Mission 1000 and Vision 2020 is to
consolidate its current position and constantly introduce new services and products that
are relevant to the needs of consumers.
To combat competition, DTDC is heavily investing in technology, infrastructure, brand
development and network expansion. A three-year program that started last year,
involves an investment of over INR250m in brand building and a complete upgrade and
standardization of all DTDC outlets. DTDCs road map for growth is to aspire to be an
INR50b company from the present level by 2020.
November 2014
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PAYU
PayU
About PayU
PayU is one of the largest consumer payment processor globally, with operations in multiple
countries and a clear leader in the Indian market. USD25b media and internet giant is the parent
company.
Merchant base
PayU today has 36,000+ merchants. The company is adding ~4,500 merchants on a monthly.
These fall into three main categories.
E-commerce typical e-tailing transactions
Non- ecommerce: this includes billers, Government, Insurance, IRCTC, airlines etc.
Offline small sized merchants who collect payments online or through mobile occasionally.
Operating through to sites
PayU has two websites PayU.in and PayUmoney.com. Bulk of the smaller merchants is in
PayUmoney.com. It is a It also aids buyers, with features like buyer protection, and other services
like reward points. PayU.in is purely an e-commerce oriented payment gateway service. It is
primarily meant for large merchants
Leading payment solutions

provider
Outside of India it is also a prominent player in regions like Central Eastern Europe, Latin
America, and Africa.
PayUs services are used by leading companies like goibibo.com (group company),
snapdeal.com, bookmyshow.com, freecharge, Jabong.com, Groupon India, BigBasket.com,
pepperfry.com,
The company claims to be among the most aggressive player in the market in terms of pricing
November 2014
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DIGITAL CONTENT: Hungama

Hungama
About the company
Founded in 1999 as Hungama.com and headquartered in Mumbai, Hungama Digital

Media Entertainment ("Hungama") is India's leading digital media platform with
businesses in mobile, gaming, online music retail including Hungama.com, voice services
and integrated media
Hungama is the largest aggregator, developer and publisher of Bollywood & South Asian
entertainment content in the world, having worldwide exclusive rights to over half a
million music and video titles
The company serves content to consumers in 47 countries across Mobile, Internet, IPTV,
DTH services and Applications, and has more than 150 partners across the world
Hungama had sold 51% stake in Hungama Digital Services (the digital agency business of
Hungama) , to WPP Groups wholly owned agency JWT Singapore in June 2012
Business expansion
Expand streaming services, more concentration on Mobile as a channel

Expand DTH and VAS offerings
Business model
Sale of digital content like full length music tracks, videos, movies, ringtones, other mobile
content and apps across various categories
As India's leading Digital agency, working with brands on digital/mobile campaigns
Monetization of gaming content (own IP for 600 flashgames)
Business scale
2.5 million content pieces across various genres and languages in the form of music
tracks, movies, music videos and mobile content, including includes a movie catalog over
5,000 full length movies and television titles, acquired through content partnerships with
movie studios like Yash Raj Films, T-Series, Reliance Home Video, Ananda Video, Ultra,
Shemaroo, Krishna and Kavitalaya
Partnerships with over 400 content creators, record labels, studios, broadcasters, game
publishers on a worldwide exclusive basis for digital and mobile content
Hungama has successfully managed more than 2000 mobile and digital campaigns for as
many as 350 brands globally
Won close to 100 international awards across Mobile Entertainment, Digital Advertising
and Gaming
It claims to power around 75% of all mobile entertainment content in India
It has conceptualized and created over 100 games around Bollywood and Indian films
Runs the website BollywoodHungama.com, which has 7 million visitors a month
Investors
Rakesh Jhunjunwala
ICICI Venture (exited)
Reliance Capital
Intel Capital
Bessemer Venture Partners
Funding history
Undisclosed amount in 2000

Undisclosed amount in 2012
USD40m in 2014
November 2014
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November 2014
100
APPENDIX I: Policy framework wish list

Industry body IAMAI spells out the imperative for sustained growth
Outline of a policy framework
In our view, if the policy is to open e-commerce in goods to FDI, it should be
formulated in a manner that should allow for a substantial-yet-smooth flow of
investments. Secondly, it should take care of some of the sensitivities, real or
perceived, society may have.
Based on these two aspects, we suggest few salient features:
100% FDI should be allowed: The rationale behind this is: [a] it is a logical
extension of 100% FDI in single brand retail and [b] most large brands who
would want to set up on their own, should not be forced into a partnership
as this is not a strategic sector.
No differentiation between strategic and financial investments: In our
view, such technical and somewhat artificial definitional differentiation leads to
confusion and possibly non-transparent arrangements.
No artificial floor to investments: Our rationale is that such ceilings act as a
barrier to smaller investors, while encouraging larger investors who usually use
this as a competitive advantage.
No investment in agriculture sector [except processed and packaged food]:
Since the larger goal in the first step is to take care of the distribution needs of
manufacturers and traders, it is suggested that e-commerce in goods, at this
stage, should not be encouraged in the farm sector. It will take some years of
capacity and outreach building before e-commerce companies develop the
capacity to purchase directly from the farm level.
Not limited to states: As a policy and practice, it is not possible to restrict ecommerce to few states. However, it should be left to individual companies,
based on a complicated matrix of logistics, state level paper work etc to decide
which geographies within the country they would like to extend the services.
Local sourcing: Ideally, though we would not suggest any ceiling on local
sourcing, e-commerce in goods is primarily about sourcing locally. Companies
need to be capable and willing to undertake more than 30% of local sourcing.
Thus, we conclude that:
There is substantial investor interest in this sunrise sector and an open FDI regime
is likely to lead to considerable investments.
An open FDI will lead to promotion of e-commerce, which in turn would lead to
much social and economic good. There is a clear link between economic and social
goals and FDI in e-commerce. The current distribution model is also one-way. It
usually flows from the urban centers to rural areas. Spread of e-commerce in goods
can be a great opportunity for synchronous commerce, whereby a buyer is also a
potential seller and vice versa. This would be a game changer.
November 2014
101
APPENDIX II: A primer on models

From B2B to B2B2C
The common business models which are facilitated by e-commerce are as follows:
B2B: E-commerce has enabled businesses to build new relationships with other
businesses for efficiently managing several of their functions. In fact, there are
variants to a B2B model -- some provide distribution services, others provide
procurement services and there are B2B businesses which act as digital market
place or as industry consortium as well. IndiaMART.com is one such B2B online
market place which provides a platform for businesses to find other competitive
suppliers. On the other hand, Ariba provides procurement services by enabling
access to digital electronic market.
B2C: Direct dealings between businesses and consumers have always existed.
However, with the emergence of e-commerce, such transactions have gained
momentum. In a traditional B2C model, the distribution channel typically starts with
a manufacturer and goes through a distributor/wholesaler to retailer, who interacts
with the end customer. However, in an online model, one finds the manufacturer or
intermediary directly trading with the consumer.
C2C: Traditionally, consumers have had dealings with other consumers, but only few
of those activities were in a commercial sense. E-commerce has made it possible to
bring together strangers and provide a platform for them to trade. For example,
portals such as eBay and Quikr enable consumers to transact with other consumers.
C2B: This is a relatively new model of commerce and a reverse of the traditional
commerce models. Here consumers (individuals) provide services/goods to
businesses and create value for the businesses. This type of transaction can be seen
in Internet forums whereby consumers provide product development ideas or in
online platforms where consumers provide product reviews that are used for
advertisement purposes.
B2B2C: It is a variant of the B2C model, wherein there is an additional intermediary
business to assist the first business transacting with the end consumer. This model is
poised to do much better in a web-based commerce, with reduced costs of having
an intermediary. For instance, Flipkart, one of the most successful e-commerce
portals provides a platform for consumers to purchase a wide variety of goods such
as books and music CDs. In fact, the growth of this model is evident from the surge
in e-commerce players adopting this model in recent times FashionandYou, Jabong
to name a few. Apart from businesses providing intermediary services such as
Flipkart, many online platforms tie up with payment gateway facilitators who
provide a platform for processing payments.
November 2014
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APPENDIX - III: Regulations will have to play ally

Lack of policy framework and clarity on taxation potential deterrents
Limitations on FDI in Retail has driven choice of business model

Flipkart and Amazon are
operating as marketplaces
in India due to the
regulations limiting FDI in
online retail
There is no existing policy framework that governs FDI in e-commerce; it is

clubbed under the general rules for FDI in retail.
As per extant FDI policy, FDI up to 100% is permitted in B2B e-commerce
activities under the automatic route.
FDI in B2C e-commerce is prohibited. Global online retailers or international
investors looking to sell products directly to customers are prohibited from
doing so, just like the offline FDI policy on retail.
FDI in India is a complex issue in itself, as FDI in multi-brand retail has been
allowed only in cities with a population of 1m and above.
Enforcement Directorate probes in the case of Flipkart.com is the latest
development as a result of the ongoing saga of FDI in e-commerce.
Lack of clarity on taxation laws

Lack of taxation policies is
another grey area, causing
taxation claims by separate
states on various grounds
The rise of e-commerce poses new questions for taxation policies and
administration. E-commerce blurs the distinction between the sale of goods, the
provision of services, and licensing of intangible assets. Each of these is subject
to some form of taxation.
According to media reports, tax authorities in Bangalore, the capital of
Karnataka, are looking into why Amazon India does not pay value-added taxes
as required under the VAT Act, 2003 on goods stored in its warehouses. Tax
officials have told Amazon that since the company stores products from
thousands of merchants in the same warehouse, it is, in practice, acting as more
than just a service provider. If that is the case, then Amazon is also in principle
flouting the FDI norms.
While the growth proposition of the industry is hard to bet against, clarity is
required on issues like FDI and state-level taxation for a smoother run in online
sales. The government is opening up to take a stance DIPP (Department of
Industrial Promotion and Policy) has asked for comments, reviews and
suggestions from industry players and those associated with the online retail
industry in the discussion paper it released on 30 January 2014.
Advantages and disadvantages of FDI as per DIPP

Advantages
November 2014
Boost to infrastructure development: Increased capital will help to establish

supply chain, distribution system and warehousing.
Impetus to manufacturing: Growth in retail sector will have cascading effect in
the manufacturing sector, which will positively contribute to overall growth of
economy and job creation.
More efficient supply chain management: Need for middlemen will reduce,
leading to lower transaction costs, reduced overheads, and reduced inventory
and labor costs.
Adopting best global business practices: Will lead to better work culture and
customer service.
103
Increased outreach: Will provide increased access to buyers/sellers, allow

MSMEs and artisans to reach out to customers far beyond their immediate
location, both locally within India and abroad.
Traceability and transparency: Will not only empower consumers with
information and data but also help in better regulatory compliance.
Reduced costs: Reduced costs on marketing and distribution, travel, materials
and supplies will benefit businesses.
Improved customer service: Will help to provide more responsive order taking
and after-sales service to customers, and competitive pricing.
Disadvantages
DIPP has put out a
discussion paper to seek the
views of relevant
stakeholders on the various
pros and cons of FDI in
Retail
November 2014
Works against spirit of FDI policy in MBRT: Allowing FDI in e-commerce will
provide e-retailers complete geographical reach. This will be against the spirit of
FDI in multi-brand retail (restricted to cities with a population of more than one
million or any other city as per the choice of consenting states).
India is not yet ready for opening up the e-retail space to foreign investors. It
will seriously impair small-time trading of brick and mortar stores. Small-time
shopkeepers are not highly qualified and will not be able to compete with a
sound e-retail business format.
Because of scale of economic operations, e-commerce players in the inventorybased model will have more bargaining power than standalone traders and will
resort to predatory pricing.
The infrastructure created by major e-commerce players will be captive and the
government will not be able to achieve its objective of creating back end
infrastructure.
The Indian e-commerce market is at a nascent stage of development. FDI in ecommerce could have an adverse impact on the domestic industry. It could lead
to monopolies in e-commerce, manufacturing, logistics and retail sector.
Inventory-based e-commerce competes directly with MSMEs. Indian ecommerce B2C is growing in an eco-system with Indian-owned/led companies
offering open marketplace models, which provide a technology platform to help
MSMEs reach across India and even globally. These marketplaces do not
compete with MSMEs or retailers and allow everyone to trade. On the other
hand, allowing the entry of inventory-based large foreign e-retailers may shrink
Indian entrepreneurship and the MSME sector.
104
APPENDIX IV: Metrics comparing the global giants

Revenues, profits and cash flows
Exhibit 123: Revenue variations significant due to different recognition methods
Source: Company, MOSL, Bloomberg
Exhibit 124: Differential revenue recognition methods / business models drive stark differences in OPM
Source: Company, MOSL, Bloomberg
Exhibit 125: Alibaba is forecast to continue leading growth
Exhibit 126: OCF is comparable across companies
November 2014
Exhibit 127: but Amazon has higher capex and lags FCF
105
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Research Report On Ecom

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Thematic | November 2014

Fast and furious

Ashish Chopra (Ashish.Chopra@MotilalOswal.com); +91 22 3982 5424

Indias 213m strong internet population as on 2013 is seeing 5m additions every

This is just the beginning

Online Retail penetration (%)

Capital + Ecosystem + Small base Soaring growth over multiple years

India's Digital commerce (USD b)

E-commerce market (USD b)

Competitive intensity running high; road to profitability long-winded

Heavy discount on online sales is a direct reflection of the industrys competitive

Model conundrum: Inventory or marketplace? Single or multi-category?

Room for single-category players in select segments, most prominently, Fashion:

Ensuing opportunity for allied industries Logistics, Payment, Coupons

Expert Speak: Mr Rajan Anandan, HeadGoogle India

India is adding ~5m internet

Disruption in India to be brought about by Mobile Internet

India e-tailing to grow 10x by 2020 to USD45b

Capital intensity will be

Capital intensity will be higher for Indian e-commerce players

By the end of 2014, product commerce will be a USD4.5b market in India

Source: IAMAI, MOSL

Exhibit 3: Penetration of online medium for

Source: Industry research, MOSL

Exhibit 5: Drivers for growth will be increase in

Source: Industry estimates

Exhibit 2: but is still well below that at China or US

Source: Industry sources

Exhibit 4: and projected to grow multiple

Source: Industry estimates

Exhibit 6: and consequent increase in number of

Source: Accel estimates

Exhibit 8: which should be driven by fashion segment

Source: Accel estimates and industry sources

Source: Accel estimates and industry sources

Mumbai based Inkfruit.com (a community based customized fashion and accessories

Exhibit 10: ..and also aggressive pricing has meant losses

Source: Sequoia Capital, News articles

Exhibit 11: Few will emerge as winners in their segments

E-commerce in India set to explode

Indias USD11b Indian e-commerce market is expected to grow to ~USD20b by 2015

Just the beginning of solving a core demand-supply need

Source: Industry research, MOSL

Exhibit 13: set to grow at a CAGR of 63% over 2013-2016

Source: Industry estimates, Accel, Deloitte

Size of Indias e-commerce market to reach USD20b by 2015

Source: IAMAI, MOSL

Source: Industry estimates

Exhibit 16: Various sources peg extremely high growth

Source: Industry estimates

Source: Accel estimates and industry sources

Growth drivers similar to those in China

China is experiencing huge growth in e-commerce. As of March 2013, China

Source: CNNIC, Estin & Co company analysis, MOSL

The thrust to Chinas e-commerce came from multiple factors:

Physical retailers co-exist

Alibaba enjoys lions share

Source: McKinsey Global Institute Report on Chinas e-tail revolution

Share of mobile internet

69% of Chinese consumers

Aggression towards end

E-tailing Market Size

Biggest product category