MUMBAI: Losses suffered by ecommerce players in India are still on the rise and there are no visible signs of an improvement in their bottom-line any time soon as companies are heavily investing in customer acquisition and infrastructure as part of their expansion strategy amidst intense competition.
While some of these companies have raised fresh round of funding in the recent past that will take care of their requirement in the near future, industry experts said that the trend of rising losses suggest that they will require another round of funding to stay afloat and any disruption in funding could led to consolidation in the industry. An analysis done by Kotak Securities shows that cash burn among e-commerce players are on the rise.
For instance, the losses of the Flipkart group have averaged at `4,200 crore annually over FY17, and seem to be trending higher in FY18. Losses posted by Amazon India have increased materially from `3,700 crore in FY16 to `6,700 crore in FY18. Paytm had spun off a separate e-commerce entity in FY17, which posted a hefty loss of `1,800 crore in FY18.
Snapdeal was the outlier, with both revenues and losses declining materially in FY18.
“Walmart and Amazon have both stated their intent to continue to invest in their Indian entities. Overall, losses may remain at elevated levels in FY2019 also as investments into category expansion, customer acquisition and infrastructure continue,” said Kawaljeet Saluja and Garima Mishra, research analysts at Kotak Securities.
According to them its not just e-tailers, even cab aggregators continues to invest substantially in their business. Ola posted a loss of `3,800 crore in FY18, 21 per cent higher than the `3,150 crore loss posted in FY17.
While funds raised by e-commerce companies suggests private equity and venture capital funding is fairly robust, Kotak analysts pointed towards the change in the nature of fund providers in recent years. From a PE/VC-led funding environment, India has seen enhanced funding from global companies, which are investing in India with a long-term strategic intent (Amazon, Walmart, Alibaba) and Softbank is deploying its vision fund into promising companies.
“We believe both these will keep the funding tap open for at least some time to come, though overfunded business segments (e-tail, food delivery) may see eventual consolidation. Reliance on funding providers thus remains large, and any pullback in funding may lead to some sort of consolidation in the space,” they added....