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Domestic Operators Lead In Growing Indian E-commerce Market: Fitch

The Indian e-commerce space will see huge investments and activity from the corporate financing sector in India, Fitch said.

SINGAPORE — A new report by American credit rating agency Fitch Solutions has said that rising internet usage, increasing middle class with greater consumer spending power, and the youth demographic are driving the Indian e-commerce market’s development. 

With competition in the e-commerce space high — and rising — it is expected to see plenty of activity in the corporate financing space as market players attempt to gain market share on their rivals.

While there are a growing number of opportunities, there is also increasing competition between new and existing players, said the company’s report.

“This bullish sentiment saw Indian retail firm Flipkart raise $3.6 billion in new funds from a pool of global investors in a fundraising round that gave the Walmart-controlled company a valuation of $37.6 billion,” the report said.

“Since its launch in 2014, the firm has now raised more than $10 billion in fresh funds. The latest round of funding was led by Singapore’s sovereign wealth fund GIC, the Canada Pension Plan Investment Board, Japanese tech-focused investment firm’s flagship fund SoftBank Vision Fund 2, and Flipkart’s parent company U.S. retail firm Walmart.”

Other backers on the bumper fundraising round include state-backed investment vehicles Qatar Investment Authority, Malaysia’s Khazanah Nasional Berhad, and Abu Dhabi Developmental Holding Company’s venture unit DisruptAD, Fitch said.

Further investments in the firm included companies like Chinese multinational technology conglomerate Tencent and U.S. investment firms Franklin Templeton and Tiger Global.

“The fundraising ranks as Flipkarts’s first injection of fresh cash since SoftBank divested its stake in Flipkart to Walmart for around $16 billion in 2018 and sees SoftBank support return to the firm after a three-year absence,” the report said.

“The capital injection will increase competition in the e-commerce arena in India, upping Flipkart’s challenge to market rivals including Amazon India; JioMart, the online delivery app run by Reliance Industries; Tata Group; Snapeal; Myntra; and Voonik.”

However, the pending regulatory changes reinforce a view that e-commerce market growth will continue to be driven by local firms over the long term as key policy changes provide risks to international players. However, this is not enough to put off overseas players in the market, the report said.

Amazon continues to invest and expand its footprint in the country and has adopted its approach to adjust to the regulatory changes. 

At the start of 2021, the U.S. firm entered into an agreement with local retailer Future Group — a move that set up Amazon India to become the official online sales channel for Future Retail stores, which includes mass grocery retailer Big Bazaar.

With the e-commerce industry forecast to continue growing and new regulations changing the playing field for operators, Fitch expects to see international operators, in particular, finding new and innovative ways to access the market, providing potential upside in the sector over the near-to-medium term, the report said. 

(With inputs from ANI)

Edited by Abinaya Vijayaraghavan and Praveen Pramod Tewari