Chennai: E-commerce and consumer internet companies raised over $7 billion from private equity and venture capital firms in 2018. Hyperlocal business models grabbed the highest share of the funds followed by travel and hospitality.
Of the $7.132 billion that was poured into the consumer internet sector, hyperlocal business models in online grocery and food delivery grabbed $1.625 billion or 22.8 per cent of the funds. Swiggy, Grofers, Zomato, Milkbasket and Dailyninja are some the hyperlocal businesses that raised money to capture the lion’s share of the market. The hyperlocal sector made 80 PE/VC investment deals in the period between 2013 and 2018 valued $2.3 billion, as per the data from EY India.
Travel and hospitality, with players like Oyo, raised $1.026 billion and grabbed 14.8 per cent share of the total funds. The potential of the sector to bring organization in traditionally fragmented space with high commission rates, ability to use technology to drive dynamic pricing and increase wallet share, improve customer loyalty by improving customer experience, has attracted investors to the sector. The travel and hospitality sector recorded 57 PE/VC investment deals worth $2 billion during 2013-2018.
The horizontal and vertical B2C e-commerce companies had to be contended with the third place in 2018 as the appetite for PE/VC funds in the space has slowed down after Walmart acquiring Flipkart. The segment raised $1.002 billion with 14 per cent share of the pie. The B2C sector recorded 197 PE/VC investment deals grabbing $9.8 billion between 2013 and 2018.
OYO, Swiggy, Byjus, PayTm Mall, Pine Labs, Zomato, Udaan, PolicyBazaar and CureFit collectively raised $4.6 billion in 2018.
The funding was mainly aimed at building supply chain, expanding into new segments, global expansion, acquisition or consolidation, and bringing innovative product offerings to the market.
“The last four years have witnessed a spectacular increase in PE/VC investments in India and e-commerce has been one of the leading sectors in attracting these investments. Globally, India remains the only meaningfully large consumer and retail market with significant headroom for future growth that is open to foreign investment,” states Vivek Soni, Partner and Leader – Private Equity Services, EY India.
EY India expects the momentum in the consumer Internet space to be intact in 2019 as well.
“Year 2019 is going to be an exciting one for e-commerce and consumer internet companies, however there has to be continued investment, organic as well as inorganic, in emerging technologies as also sharper focus on operational efficiency, improvement in unit economics and greater control on the cash burn, which will be essential as companies continue to innovate and engage more effectively with consumers,” said Ankur Pahwa, Partner and National Leader – E-Commerce and Consumer Internet, EY India.