Flipkart, which has some 350 million registered users, plans to use the funds to expand its operations and boost its fashion and grocery segments.
“With increased competition from both domestic and international players, e-commerce could grow in double digits in the coming years,” said Gaurav Garg, head of research at CapitalVia Global Research, an Indian stock advisory firm.
“Especially when `unicorns` [start-ups with valuations of more than $1bn] such as Zomato, which has already launched its IPO, and other firms such as Paytm are planning to go public soon.”
Indian conglomerate Tata Sons bought a majority stake in online grocer BigBasket in May. This puts Tata – which has interests in fields ranging from real estate to consumer goods, and owns brands including Jaguar Land Rover – in direct competition with Flipkart, Amazon and JioMart, a more recent entrant in the sector that is owned by Reliance Industries and controlled by India`s richest man, Mukesh Ambani.
The impact of India’s e-commerce boom is also trickling down to associated sectors, such as payments, particularly helping home-grown players tap into the funding boom.
Digital payments firm Paytm, which is awaiting regulatory approval for its public listing, said “the country’s digital ecosystem is at an inflection point and offers a massive opportunity”. The funds would help the company to compete with the likes of GooglePay and WhatsApp Pay.
Another Indian digital payments firm Mobikwik, which is backed by Sequoia Capital, is also looking to tap the capital markets. On Monday, it filed for an IPO with the markets regulator.
These companies are digital enablers and vying to position themselves for a surge in the number of internet users, which consultancy RedSeer forecasts will increase to 970 million over the next five years from 600 million currently.
“Because a large portion of the population in rural India does not use the internet, there is a lot of space for growth in the coming years,” Mr Garg said.
But there also needs to be significant investment and effort that goes into boosting India`s digital infrastructure so that companies that rely on consumers having access to the internet can realise their full potential in the country.
“From a macro perspective, India needs to nurture the digital infrastructure, in order to host global investments,” Mr Kamath said. “I am certain that with concentrated efforts, we can make the India digital and e-commerce space one amongst the strongest in the world.”
For now, the country`s digital infrastructure shortcomings are not holding back investors from ploughing funds into start-ups that are enabling digital transactions.
Startups that are going public are looking to benefit from both foreign and domestic investors alike, as stock markets have rallied. India recorded $3.6bn worth of IPOs during the first half of this year, compared to $1.1bn during the same period last year, according to Refinitiv.
“Right now, we are in the midst of a bull run” Nitin Shahi, the executive director of Findoc Financial Services Group, said.
“The market sentiment is very positive around the digital and e-commerce story of India.”
Such positive perceptions could “enable these firms filing for IPOs to get more attractive valuations right now and as a result they can generate more funds and private investors feel they can exit at good prices”.
Last week, food delivery app Zomato launched a $1.3bn IPO.
“We see a lot of excitement around the Zomato IPO given it’s the first large consumer tech company getting listed,” said Himanshu Nayyar, lead analyst, institutional equities, at Yes Securities.
Prior to the IPO, Zomato raised $562m from 186 major financial investors, including Tiger Global, Morgan Stanley and BlackRock.
The current funding boom could also help start-ups in e-commerce and digital sectors that need liquidity to strengthen their position to compete with deep-pocketed players, including Amazon, Reliance Industries, and Tata, Mr Shahi said.
“Most of these companies right now are cash flow negative and in operating losses which makes external funding all the more valuable for them, because their focus is on increasing market share.”
“It’s pretty clear that they are not going to be slowing down in terms of funding any time soon,” said Mr Shahi.
