India’s $116 billion e-commerce sector, which saw a boom during the Covid pandemic and a steep rise in funding between 2019 and 2021, has seen investments taper off as investors are hesitant to fund late stage start-ups and have cut the size of their commitments.
Mergers and acquisitions in the segment were also subdued, with only four deals being transacted, compared to nine deals a year ago and 49 deals in the first half of 2022.
Funding in the first half of 2024 more than halved to $561 million, compared to $1.2 billion in the same period last year, according to data collated by Inc42. However, investors are still putting in money at the seed stage, where there is healthy growth.
For instance, in the first six months of 2024, investments at the seed stage amounting to $116 million rose 4.5 times from a year ago, with the median ticket size at $1 million, marking nearly a 4-fold annual increase.
Investments at the growth stage rose modestly by 19 per cent to $215 million, while the median ticket size decreased by 38 per cent to $6 million. The only silver lining was that the number of deals doubled.
The scene is, however, dismal when it comes to the late stage, with investments falling by 87 per cent, the number of deals down by 27 per cent, and the median ticket size down by 32 per cent.
The three top deals in the period under review were $34 million in growth stage funding by Rainmatter Capital in D2C startup Kushal, $27 million in late stage funding in The Ayurveda Experience, and $26 million in seed stage funding by Peak XV Partners in Lyskraft.
The e-commerce sector has been unable to shake off the aftermath of the funding winter that gripped the start-up sector from 2022 onwards. The e-commerce segment saw a 47 per cent fall in funding in 2023, and the trend has continued in the current year as well. In 2021, funding to the sector reached a peak of $10.5 billion, then crashed to $3.8 billion in 2022 and $2 billion last year.
The Indian e-commerce sector’s market size is expected to rise to $400 billion by 2030, growing at 19 per cent annually. The biggest segment currently is smartphones, but by 2030, fashion apparel and accessories will be a major contributor.
There are 25 e-commerce unicorns in India with a combined valuation of $89 billion, while there are 18 soonicorns with a valuation of $6 billion.
Geographically e-commerce start-ups from Delhi-NCR and Bengaluru received the major share of the funding in the first half of 2024, with Mumbai a distant third.