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India's online retail space gets renewed interest from investors

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January 21
1:49 AM 2014

The online retail space in India was viewed as a mere investment bubble early in 2013. However, that outlook is now changing as the sector is seeing renewed interest from investors in the past six months, Mumbai-based online English broadsheet dna reported.

Citing figures from Venture Intelligence, the report said companies operating in the online space have obtained total funding amounting to $542 million last year. This was almost two times the $273 million it received from the previous year. The increase came even after overall venture capital investments dropped 10.3% to $805 million in 2013 from the year-before amount of $898 million, the report said.

Karmvir Avant Group's Karmvir Rajpurohit told dna that there are attractive opportunities for private equity and venture capital investors in the jam-packed e-commerce segment. He said, "Instead of me-too kind of sites, investors are looking at companies that will enjoy the first-mover advantage in online retailing." Karmir Avant Group has backed online supermarket chain localbanya.com, the report said.

Funding, however, is given to niche startups and large players that are already established in their fields. In other words, it's an uphill climb for medium sized online retailers, according to the report. Ozone (O3) Capital Advisors Director Deepesh Garg told dna, "As a result, the latter will either get acquired by larger players (especially those with same set of investors) or will have to shut shop (if the business is completely unviable). Unless immediate future growth projections are viewed as achievable, it would be a tough for them to attract investors."

Citing the CMO of myntra.com, Ganesh Subramanian, the report said e-commerce is still an emerging segment in the country. Investors are compelled to evaluate the space because it is posting a 30% to 40% compounded annual growth rate or CAGR.

A Technopak Survey also revealed that India's online retail sales is forecasted to top a growth of $760 billion by 2021 from the 2012 figure of $600 million, the report said. 

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