Private equity investments in Indian online and e-commerce ventures have increased by almost 147 per cent over the last year.
According to a report by Venture Intelligence, a research service focused on private equity and merges and acquisitions – FY-11, private equity funds invested Rs 1,040 crore ($230 million) in 33 online ventures while Rs 420 crore ($93 million) was invested in 20 online entities in FY-10.
“E-commerce investments are capturing much interest among private equity firms. The increasing Internet penetration and access to 3G devices is encouraging consumers to make more online purchases,” said Mr Mukul Arora, Associate, SAIF Partners, a private equity firm.
SAIF Partners recently invested $4 million in Firstcry.com, a portal on mother care.
Private equity investments in e-commerce ventures amount to Rs 320 crore ($72 million) in calendar 2011 so far, against Rs 220 crore ($49 million) in 2010.
The top investment of 2010 was $13 million in a company called Myntra made by Tiger Capital, IDG Ventures India, Accel India and IndoUS Ventures, according to a report by Venture Intelligence.
“Many private equity firms are investing in social commerce ventures. Portals like Groupon have got investments of around $950 million. There are many such group buying ventures that private equity firms are looking to invest in,” said Mr Pradeep Tagare, Investment Director, Intel Capital.
Group buying ventures sell products at discounted rates when several buyers agree to pay a particular price for that product.
A minimum investment of $30 million is usually required in e-commerce ventures. “PE firms are trying to understand consumer buying patterns. PE firms feel that investing in group buying ventures is profitable,” said Mr Avinash Gupta, Leader, Financial Advisory, Deloitte in India.
While group buying sites appear to be the favourite among PE investors in India, some are of the opinion that there are other categories of e-commerce ventures that are equally attractive. “In the US market, there are quite a few investments in social commerce ventures. In India, I feel investments in mobile commerce will be more than in group buying ventures,” said Mr Rahul Chaudhri from Helion Venture Partners, a venture fund.