E-commerce boom: More start-ups join the Rs 1,000-crore club

High penetration of internet, increased use of smartphones help the cause of top e-commerce firms, leading to a rapid rise in their valuations.

For the Indian e-commerce sector, the last few months have brought cheer, as more start-ups have joined the Rs 1,000-crore club. 

The most recent to enter the elite club include Olacabs, BookMyShow, Zomato and Quikr. 

The high penetration of internet and the increased use of smartphones have helped the cause of top e-commerce firms, leading to a rapid rise in their valuations, experts say.

The quick growth of internet-based companies comes at a time when e-tail major Flipkart is valued at an estimated $4-5 billion (Rs 24,000-30,000 crore) and listed entity Justdial has market capitalisation of Rs 11,000 crore.

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Leading taxi services company Ola Cabs has seen its valuation double in the past six months, following the company’s move to raise Rs 250 crore from hedge fund Steadview Capital and venture capital firm Sequoia Capital.

In November 2013, the three-year-old company had raised funds from Matrix Partners India and Tiger Global, at a valuation of Rs 500-600 crore. 

Avnish Bajaj, Managing Director, Matrix Partners India, said, “Today, every part of the ecosystem is in place, especially with the penetration of internet/smartphones. So, we have a unique confluence of a deep market; outstanding young and hungry entrepreneurs and a health funding ecosystem. This is being reflected in the valuations, as large outcomes will be seen in three-five years.” Matrix owns stakes in Ola Cabs and Quikr.

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BookMyShow, a leader in the online ticket-booking space, has seen threefold growth in its valuation, after raising funds from SAIF Partners in June. 

In 2012, the company had raised funds from Accel Partners and Network18, at a valuation of Rs 350-400 crore. 

Deepak Kaur, managing director of SAIF Partners, said, “In B2C (business-to-consumer) technology companies, valuations are driven by leadership position, potential market size, growth rates and the strength of the founder team. Given the discontinuous increase in internet penetration, sector leaders with high growth rates will attract bigger valuations.” 

In March this year, a $90-million investment by a group of investors led by Swedish private equity firm Kinnevik, saw online and mobile classifieds venture Quikr being valued at about Rs  1,500 crore.

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Ajay Shah, partner (transaction advisory services), EY, said, “In online businesses, the right business model can help you achieve scale quickly, and VC (venture capital) investors are keen to back such businesses. There is a rapidly increasing penetration of online devices and growing comfort around transacting online among Indian consumers. This has resulted in a huge potential for growth for companies that have good technology bases, which can be scaled up.” 

The founders of the elite club of start-ups are educated at leading India institutes; many have worked at large multinational organisations earlier.

Deepinder Goyal, fonder of Zomato, and Bhavish Aggarwal, founder of Ola Cabs, have graduated from Indian Institute of Technology (IIT)-Delhi and IIT-Mumbai, respectively.

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Quikr founder Pranay Chulet is a chemical engineer from IIT-Delhi and has master’s degree in business administration from Indian Institute of Management-Calcutta.

Earlier, Deepinder Goyal had worked at Bain & Company, while Bhavish Aggarwal had a two-year stint at Microsoft Research.

Avnish Bajaj says, “During the late 90s, when we started Baazee.com, there were no VC investors and no entrepreneurial role models. This changed, with a few VC firms starting operations in 2006-07.” With the help of good venture funds, the quality of young entrepreneurs improved, he added.

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Experts say mobile-based applications play a key role in the growth of start-ups in India. 

According to reports, bookings through the BookMyShow app rose to a quarter of the overall bookings within a year of launching the mobile app.

According to a recent study by Avendus Capital, the number of users who access internet through 3G connections has risen to about 22 million in the last three-four years.

STRIKING BIG

Ranking only behind China and US, India has about 117 million smartphone users

Number of 3G users in India has grown to 22 million

Leading taxi services firm Olacabs’  valuation doubled in six months

BookMyShow valuation has grown threefold in two years