RIL’s New Business Pangs


December 26, 2014

Nevin John, Businessworld

New Delhi, 26 December 2014

The Annual General meeting (AGM) of Reliance Industries (RIL) on 18 June 2014 was significant. RIL chairman Mukesh Ambani’s wife Nita was inducted to the board of the $67 billion petroleum giant with the overwhelming support of shareholders. She is the first woman from the family to join the key decision-making body.

Four months later, on 11 October, RIL subsidiaries — Reliance Jio Infocomm and Reliance Retail Ventures — announced the appointment of Ambani scions, daughter Isha and son Akash, to their boards.

The induction of family members to the boards of group companies comes at a time when RIL, India’s largest private company by revenue, is in the midst of its largest investment cycle. The company will pump in Rs 1.8 lakh crore into a large pet coke gasification plant, a petchem cracker unit, a country-wide fourth-generation (4G) digital network and India’s largest network of retail stores spanning ‘value’ and ‘speciality’ formats.

Again, while the telecom and retail businesses hold promise, many of the group’s businesses are struggling.

The hydrocarbon exploration and production (E&P) business is falling apart, with no significant recovery in sight. Anomalies surrounding gas pricing and the fast depleting Dhirubhai-1 and -3 gas fields — due to geological complexities in the Krishna Godavari (KG) basin — are stifling the growth prospects of the company’s upstream business. Even the organised retail business is yet to come anywhere close to the projected revenue growth, while the broadband foray has been delayed on account of the extensive technical work involved in creating a pan-India network.

That sure is a lot to handle for the Ambani family, which faces the tough task of rebuilding the company into a global force to be reckoned with.

Spending Spree

Based on RIL’s March 2014 annual report, Moody’s estimates that the company has invested around Rs 40,000 crore in Jio, with Rs 30,000 crore more to be pumped in over the next two years. Jio, the only private player with broadband wireless access (BWA) spectrum in all 22 telecom circles, is expected to provide high-speed broadband connectivity and rich digital services on a pan-India scale.

In 2010, the company bought 20MHz of spectrum in the 2,300MHz band for Rs 12,847 crore. Three years later, in October 2013, it received the unified licence — against a one-time entry fee of about Rs 1,673 crore — for all the 22 service areas to offer all telecom services, including voice telephony. This February, adding to its broadband reach, it acquired more spectrum in the 1,800MHz band in 14 circles for Rs 11,054 crore.

To ensure high data transmission speeds, Reliance Jio has laid around 100,000 km of optical fibre across the length and breadth of the country. In areas it doesn’t cover, the company has signed agreements with Bharti Airtel, Reliance Communications, BSNL, Tower Vision, ATC India, Viom Networks, Bharti Infratel, Indus Towers and GTL Infrastructure that will allow it to share tower infrastructure, among other things.

According to a Credit Suisse report, the company has installed approximately 32,000 long-term evolution (LTE, which is a technology standard for high-speed wireless data networks) base stations. It has signed on Samsung Electronics for supplying equipment for 60,000 base stations and is expected to sign an agreement for an additional 50,000-70,000 base stations soon, says the report. In all, the number would be on a par with big operators such as Bharti Airtel, Vodafone India and Idea Cellular.

Work In Progress

Ever since broadband licences were handed out, the industry, Jio’s rivals, analysts and consumers have never ceased to speculate about the launch of services. But Mukesh refuses to set a deadline for his team. “Broadband is going to be a big stroke. He wants his team to be free from compulsions,” says a company executive.

At the 2013 AGM, Mukesh announced that the launch of Jio’s services would take place in 2014. But in the latest meeting, he extended the date and said services would only start in 2015. According to him, the project would cover all states — around 5,000 towns and cities, accounting for over 90 per cent of urban India, and over 215,000 villages. The target is to cover over 600,000 villages. The company’s acquisition of Network 18, a media group, is said to be helping in the creation of content for its 4G services. In the midst of Jio preparing to launch its services, a controversy erupted recently when the Comptroller and Auditor General (CAG) of India reported that RIL had benefitted unjustly to the tune of Rs 22,842 crore in the grant of 4G licences. Despite repeated attempts by BW | Businessworld, RIL did not revert with a response to BW’s queries.

The spectrum issue aside, among other things working against the company is the price war in the telecom space. Bharti Airtel is already offering high-speed 4G packs at rates lower than those of 3G plans, signalling a tariff war on the mobile data front. Anil Ambani’s Reliance Communications, on the other hand, has launched ‘Pro 3’, an unlimited data plan for Rs 999 a month, with speeds of up to 14.7 Mbps, enabling lightning-fast data streaming. Handsets are another pressing issue for the company. RIL shareholders still remember the Monsoon Hugama of 2003. Then, as part of Reliance Infocomm’s cellular services, the company gave away mobile handsets for Rs 500 along with a CDMA connection. The customer base skyrocketed within months of the launch. Though CDMA as a technology failed to catch up with GSM, Monsoon Hungama went down as a super success.

Jio has to come up with something similar on the gadget front. The Credit Suisse report says smartphones below $100 could become a reality and prove disruptive in the market. Jio is already testing its services through its products at Navi Mumbai and Jamnagar. Also, it has written to the Department of Telecommunications for a network test to be conducted along with security agencies.

For The Long Haul

The other area where RIL is looking to make its mark is retail. It was Mukesh’s idea to enter the sector, essentially with the aim of expanding the company’s revenue base. But Reliance Retail, which opened its first store in 2006, has not contributed even half a per cent to RIL’s revenues in the past five years.

The company has, however, emerged as the largest retailer in the country after the degrowth of other big names such as Big Bazaar, More and EasyDay. Reliance’s various speciality formats — Trends (apparel), Digital (consumer durables and information technology), Footprint (footware) and Fresh, Mart and Super (value formats), have achieved the leadership position in their respective segments.

In its initial years, Reliance Retail had more than its fair share of problems from state governments and kirana traders. In excess of 50 licences and permits are needed to set up a store in India. So, setting up a pan-India supply chain and store network wasn’t a walk in the park. Mukesh stayed the course and his persistence began to pay off. The business now spans 2,000 stores, covering an area of 11.7 million sq. ft across 155 cities. Last year, 367 new stores were added — effectively one store every day!

In the first half of the current financial year, the revenue from retail stood at Rs 8,166 crore — up 17.3 per cent from the same period in the previous year. The earnings before interest and taxes (EBIT) went up more than two times,to Rs 180 crore. In the last fiscal, the retail business posted revenues of Rs 14,496 crore and profit before depreciation, interest and taxes (PBDIT) of Rs 363 crore.

“In the coming years, retail will emerge as a major growth engine for our consumer business and for Reliance by creating significant societal value,” said Mukesh at the AGM. Reliance Retail’s projection on the revenue front for 2017 is Rs 40,000-Rs 50,000 crore, which S.P. Tulsian, an independent analyst, says will be tough to achieve.

Devangshu Dutta, chief executive of retail consultant Third Eyesight, says RIL is in retail with a long-term plan. “They have the cash flow to stay put in the business and experiment with different business models. They recently rationalised their stores — closing non-profitable ones and opening at other locations. Even the top team changed several times as part of the experiments.”

In 2012-13, the retail business’s earnings before interest, taxes, depreciation and amortisation (EBITDA) turned positive for the first time. But Tulsian doesn’t buy it. “I am not very excited about it (positive EBITDA) because interest and depreciation are major factors in the retail business. Reliance has a huge interest burden. Since it is a cash-rich company, it doesn’t have an interest in counting the liability of the retail business or is not factoring in the liability,” he says.

Arvind Singhal, chairman of Technopak Advisors, justifies the numbers and says the return will not be robust if retailers invest in size and scale. “Reliance has created solid back-end resources to travel the distance.”

Lately, the organised retail market has not been doing too well. Very few Indian retailers have increased the number of stores in the past four years; instead, many have cut down. Future Group’s Big Bazaar and Aditya Birla Group’s More have shut down 30-50 per cent of the value format stores and are now focusing on the high-margin supermarket and hypermarket businesses.

Since RIL is number-focused, it continued adding floor space. This could turn out well for the company in the near future, unlike the investments in some of its ‘successful’ businesses that are experiencing a downturn.

Pain Point

RIL entered the E&P business in line with the backward integration concept propounded by founder Dhirubhai Ambani. Since its very first extraction of oil from KG-D6, the business offered humungous margins to the company. But in the last two years, the production of natural gas has witnessed a steady decline. The revenue share from exploration and production fell to 1 per cent in the last financial year from 5 per cent in 2010, while the EBIT plunged to 7 per cent from 27 per cent.

In the first quarterof the current financial year, the average production from KG-D6 stood at 13 million standard cubic metres a day (mscmd), against the projected production of over 80 mscmd. In 2010-2011, the revenue and EBIT from the E&P vertical was Rs 17,250 crore and Rs 6,700 crore, respectively; both fell to Rs 6,068 crore and Rs 1,626 crore, repectively, in 2014.

An RIL press release calls E&P highly complex operations, having a low success rate , saying “initial interventions have not met expectations.” But, statistically speaking, RIL made profits in this business too. Of the nearly $10.5 billion invested on productive offshore assets, the company has already recovered partial costs through the sale of gas. In addition, it raised $7 billion by selling its 30 per cent stake in its upstream assets to British giant BP in 2011.

While its D1 and D3 discoveries have no scope of producing gas, RIL has decided not to make further investments on developing the R-series, MJ1 and satellite fields till the government gives its nod to the ‘market price’ — linked to the international price of crude — for gas.

According to the Rangarajan Committee report, while the UPA government had approved doubling of gas prices to $8.4 per mbtu, the Election Commission stalled the move during the elections, leaving it to the new government to decide. The NDA government, on its part, sanctioned a lower price of $5.6 per mbtu (up from $4.2), making deepwater exploration unviable.

The new government also imposed an additional fine of $579 million on RIL for reduction in gas production, taking its total penalties to $2.4 billion. The company has begun arbitration proceedings to seek redressal.

Tulsian says there is no logic to increasing gas prices since the contractor has recovered costs. “BP’s investment in these fields is a big mistake. It cannot recover the cost…. They (RIL and BP) are trying to link their cost recovery to gas prices, which is wrong.”

Considering this, BP, in the last quarter, wrote down the value of its investment in KG-D6 by $770 million. “The charge arises as a result of uncertainty in the long-term gas price outlook, following the introduction of a new formula for Indian gas prices,” the company said in a statement.

But RIL’s view is that it, along with its partners, spent $7.4 billion on developing non-KG-D6 blocks and on exploration work at relinquished blocks. “In case prices are to be fixed on the basis of cost of production, the additional cost of $7.4 billion will also need to be reimbursed,” the company said in a report titled Flame Of Truth. Besides, the interest burden on its investments spread over 10 years is yet to be recovered, says a senior company executive. V.K. Vijaykumar, investment strategist at Geojit BNP Paribas Financial Services, says the market’s short-term worry is gas production from KG-D6 and its price. “The revenue from shale gas is the cushion for RIL when KG-D6 underperforms. But shale gas will not become a substitute in the long run,” he says.

Big Money-spinners

RIL’s last major asset creation happened five and a half years ago when it developed India’s largest offshore hydrocarbon block, KG-D6, along the Andhra coast, and commenced production in September 2008. Three months later, it completed the construction of the second refinery at Jamnagar in Gujarat.

The only noticeable asset addition after that was the acquisition of stakes in shale gas blocks in the US. In 2010, RIL invested in shale gas, when there was no clarity about its prospects. Today, RIL has three joint ventures — with Chevron, Pioneer and Carrizo —and has made a cumulative investment of $7.7 billion (as on 31 September 2014). The JVs have witnessed strong growth in production, driven by good additions and strong productivity over the years. RIL’s revenues and profits from shale gas have overtaken its domestic E&P business. In the first half of the current financial year, RIL’s revenues from shale gas stood at Rs 3,236 crore, reflecting a year-on-year growth of 43.6 per cent, and EBIT was at Rs 1,047 crore, up 44.8 per cent. The EBIT margin was at 32.4per cent.

So, from the financial point of view, RIL’s refineries and the petrochemical complex continue to be its financial backbone. The twin refineries with an aggregate capacity of 1.24 million barrels of oil per day (mbpd) generated a revenue of Rs 4,02,149 crore, which is 78 per cent of the total revenue, in the last financial year. The EBIT from the business was Rs 13,392 crore, about 55 per cent of the total. While refineries contributed over 70 per cent to RIL’s revenues in each of the past five financial years, the petrochemicals business stood second with over 20 per cent. But the contribution to the EBIT was much higher for the petrochemicals business — at 36 per cent last year. The business generated Rs 69,539 crore in revenues and an EBIT of Rs 8,403 crore in 2013-14.

In the first half of the current financial year, when the company recorded Rs 2,21,301 crore in revenues and Rs 22,895 crore in profit before depreciation, interest and tax, the revenues and EBIT from the refineries were at Rs 2,01,671 crore and Rs 7,658 crore, respectively. The average gross refining margin for the second quarter rose to $8.3 per barrel from $7.7 a year earlier. The revenues and EBIT from petrochemicals in the first half were at Rs 52,049 crore and Rs 4,224 crore, respectively. The petrochemicals division has registered an 8.1 per cent EBIT margin.

Debt For A Reason

RIL was debt-free on a net cash basis until a year ago as cash reserves were higher than the consolidated debt. But the extensive borrowings for telecom and petrochemical capacity expansion have tested its balance sheet. On 30 September 2014, RIL had a consolidated debt of Rs 1,42,084 crore. Discounting the cash hoard of Rs 83,456 crore on its books, the net debt stood at Rs 58,628 crore.

The analysts, however, support the massive capital investments by the company. Mukesh’s foray into broadband and the telecom sector at large will ensure effective deployment of its consistent cash flow from the traditional businesses, they opine. Deven Choksey, managing director of K.R. Choksey Securities, says RIL’s cash flow of around Rs 40,000 crore has forced it to invest in capital-intensive sectors. “Which means, the cash flow of three financial years and the existing cash reserve are enough for the company to fulfil the next three years’ investment commitment of Rs 1.8 lakh crore,” says Choksey.

In the past four years (3 January 2011 to 19 December 2014), RIL’s scrip has dipped 14.69 per cent, while the BSE Sensex gained 33.12 per cent in the same period. In 2014 (till 19 December), its share price staged a modest recovery, gaining 1.28 per cent, to touch Rs 900, even as the BSE Sensex rose 29.48 per cent.

According to Mukesh, the company is at an inflection point in its journey to create value for its stakeholders. “In the next two years, we will go up in debt to about Rs 60,000 crore. Our goal is to become debt-free by 2017-18 on a much larger base,” he said. It appears he is risking the short term for the long term.

(Published in Businessworld issue dated 12 January 2015)

More than Being Human


December 25, 2014

Sharleen D’souza , Business Standard
New Delhi, 25 December 2014

Mandhana Retail Ventures, the retail arm of Mandhana Industries, which holds the licence for the brand Being Human, plans to dig its heels in building more brands. While its parent company exports textile and garments to popular global apparel brands, Being Human was its first brush with retailing in its home market. Licensed out by a charitable trust under the same name set up by Bollywood actor Salman Khan, the Mumbai-based garment and textile manufacturing company demerged the retail business in November, 2014.

It has set the stage for the company to launch more retail brands. It has a three-pronged plan for Mandhana Retail to expand – extend Being Human into more categories, sign licensing deals with global brands and even flag off a home-grown brand of its own.

Being Human, which currently has more than 500 points of sale, appears to have instilled the confidence in Mandhana’s promoters to forge out on their own in apparel retail in India, which is not only crowded but also unorganised to a large extent.

“Retail is here to stay, it does require a different mindset and skills. But with Being Human, we have gained that confidence and now plan to start our own brands, as well as get into licensing deals due to the good prospects they offer, and to give value to our shareholders,” says Manish Mandhana, MD of Mandhana Industries.

Mandhana’s, the textile division already exports to big brands overseas like H&M, Marks & Spencers, Abercrombie & Fitch and Banana Republic. It also retails Being Human abroad-Europe, West Asia, South Africa and Sri Lanka, notching up a global presence through shop-in-shops.

Licensing of international apparel brands already has players with considerable clout in the business. There is Reliance Brands (RIL) and Arvind Lifestyle Brands are some of the well-established players. “Mandhana Industries supplies apparel to many international brands and this will help the company get its foot in the door. But beyond that, it will have to show capabilities. There is a huge opportunity in the market to bring in more brands and create home-grown brands but these depend on the organisational capabilities, and management of multi-product portfolios. Mandhana has shown it has what it takes to make a brand grow with Being Human,” says Devangshu Dutta, CEO of the retail and consumer consultancy Third Eyesight.

Mandhana Retail Ventures has the licence to handle the retail, designing, manufacturing and marketing of Being Human till March, 2020. It has also started to offering clothing for women and kids under the brand. In the next six to eight months, the collection’s accessories arm (includes belts, wallets and slippers so far) will be strengthened. Accessories in fashion enjoy considerable higher margins in general, and for Being Human, contributes 10 per cent to its topline (other apparel with accessory lines often see revenues from accessories at 5-7 per cent according to industry observers). A greater focus could take the accessories contribution to 30 per cent in the next two years, estimates the company.

Prashant Agarwal, joint-managing director of Wazir Advisors agrees that, “The company needs to focus not only on the charitable part of Being Human, but also increase the fashion quotient of the apparel brand. Being Human has become a strong brand but the product’s value will be enhanced when design is given due importance.”

The company also sees 15 per cent of revenues come from e-commerce. “You can’t disregard e-commerce, it forms a considerable part of our retailing; we are present across most websites like Flipkart, Myntra, Jabong and will take Being Human to other sites as well,” says Manish.

In 2013-14, retail for Mandhana clocked Rs 132 crore in revenue and the company hopes to see it grow by 30 to 40 per cent in FY-15. Experts say that de-merging the retail business is a logical step for a textile company which has stepped into retail and this will help improve the valuation of the company.

“It helps to keep both the businesses separate as both have different requirements. Also, it will not create unnecessary competition amongst the employees,” says Agarwal. The company also needs to focus on which brands it plans to tie up with to arrive at a clear positioning, says Agarwal.

(Published in Business Standard)

More niche acquisitions likely in e-commerce sector, say analysts


December 19, 2014

Arpita Mukherjee, Business Today

New Delhi , 19 December 2014

In a bid to strengthen their presence in the e-commerce sector, large players such as Amazon, Snapdeal and Flipkart are likely to look at acquiring companies with niche, differential capabilities, say industry analysts.

With the recent acquisition of gifting technology platform Wishpicker by Snapdeal and reports about its acquisition of online order management platform Unicommerce, experts feel e-commerce players are looking to benefit from the vertical capabilities that such companies have on offer.

"Snapdeal will be able to leverage Unicommerce’s platforms to achieve in-depth visibility into its vendor profiles in terms of both inventory and accounts as well as improve its customer services," says Sanchit Vir Gogia, Chief Analyst and CEO, Greyhound Research.

Snapdeal is flush with cash after recently receiving $627 million in funding from Softbank. The online retailer earlier this year also acquired social product discovery technology platform

With Flipkart acquiring Myntra this year, and several other acquisitions that have been taking place over the past couple of years, this seems to be one of the trends emerging in the industry, says Devangshu Dutta, CEO of consulting firm Third Eyesight. "The key word is differential, because the generic ones have already happened to a certain extent," says Dutta.

Arvind Singhal, Chairman of Technopak Advisors, says that as investment dries up for the several niche smaller players who have been unable to show growth, these are likely to be snapped up by the bigger players. "We will see that happen more in the next few months," says Singhal. "Amazon, Flipkart, Snapdeal will start looking for specialty players, or very niche specialty players, either for the market, or for technology."

Analysts also note that while this kind of consolidation helps establish one or a few clear winners, it is not good for the industry as a whole.

According to Harminder Sahni, Managing Director of consultancy Wazir Advisors, for any industry to strive there needs to be a lot of players, creativity and lots of new ideas. And, primarily driven by investor interest, with these kinds of acquisitions, the industry is likely to go the modern retail way where there are only a few players such as Shoppers Stop and Future Group. "(Investors) are not interested in building a large ecosystem where a lot of players strive. They want to have a winner and they all want to be a part of that winner," says Sahni.

(Published in Business Today)

Big e-tailers like Flipkart, Snapdeal getting richer; Zovi, Yepme yet to touch Rs 100 cr in sales


December 18, 2014

Sagar Malviya & Snigdha Sengupta, The Economic Times
Mumbai, 18 December 2014

Despite an online shopping frenzy in the country and large investors stepping in to fund several online retailers, most e-commerce players are yet to turn their click-and-buy model into big businesses as the big ones steal the show.

While nearly half a dozen shopping portals such as Zovi, FashionandYou, Yepme and Shopclues have doubled their sales since the last two years, they are yet to reach the Rs 100 croresales mark, and pale against the likes of Flipkart, Snapdeal and Jabong that clocked anywhere between Rs 500 crore-Rs 2,800 crore in sales for 2013-14, according to filings with the Registrar of Companies.

India, one of the fastest-growing ecommerce markets, is expected to have 100 million online shoppers by 2016 when the industry will grow to $15 billion, or about Rs 93,000 crore, up from 35 million consumers and $3-billion valuation this year, according to a recent Google report. Yet, in a highly competitive marketplace, where big discounts are the primary sales drivers for online retailers, many small players are struggling to gain ground.

"For every successful online retailer, there are at least 10 others which have either shut shop or got acquired," said Devangshu Dutta, chief executive at retail consultancy Third Eyesight.

He said just selling at lower rates isn’t enough for small players at a time large players flushed with funds aggressively look to grab market share through deep discounting. "Smaller players should have some key differentiator so that customers can give business to them instead of competition," Dutta said.

In fact, with small players forced to match discounts offered by bigger rivals, most of these firms reported higher losses, some even posting half their overall sales as net loss. VAS Services, which runs Yepme portal, posted a net loss of Rs 45 crore on net sales of Rs 61 crore last fiscal, while the net loss of Shopclues at Rs 38 crore was higher than its net sales of .`30.5 crore. But investors are still upbeat about ecommerce players, due to the huge growth opportunity.

"Investors are still willing to pay fairly healthy valuations for some of the smaller players in the market," said an investor who has backed a private label e-tailer.

"Compared to other developed markets, e-commerce entry valuations in India are still relatively attractive," the person added.

Some small players did manage to improve their performance though. Robemall’s Zovi, which more than doubled its sales in FY14 to Rs 51 crore from Rs 21 crore in the previous year, reduced its net loss to Rs 19 crore from Rs 34 crore during this period. FashionandYou, a flash sales site of Delhi-based Goldsquare sales, also managed to reduce losses to Rs 20 crore in FY14 from Rs 77.9 crore in the previous year as it consolidated its business after acquiring fashion and beauty e-tailor Urbantouch a year ago.

"The focus throughout the year was to bring efficiency and cut down cost that included trimming down the employees from 1,000 to 300 people," said Aasheesh Mediratta, CEO of FashionandYou, which posted a 21% decline in sales at Rs 75 crore due to the reorganisation.

(Published in The Economic Times)

eBay lags behind Amazon and Flipkart in commission revenues


December 16, 2014

Sagar Malviya, The Economic Times
Mumbai, 16 December 2014

eBay India, one of the earliest online marketplaces in the country, has slipped behind both Flipkart and Amazon on revenues from seller commissions as its two rivals along with Snapdeal have been aggressively pushing sales with big discounting events and high-decibel marketing.
eBay India posted revenues or income of Rs 107 crore calculated on commission earned from sellers along with advertising revenues for fiscal 2013-14, according to its annual filing to the Registrar of Companies.
In comparison, Amazon Seller Services posted revenues of Rs 169 crore and Flipkart Internet that manages the portal reported income of Rs 179 crore. A year earlier, eBay’s revenue was Rs 81 crore while Flipkart trailed with Rs 15.4 crore.
These numbers are not sales from actual goods sold on their portals but are transaction and listing fees from the sellers as well as advertising revenue which is the actual revenue of e- commerce sites. eBay declined to comment on its financials.
While eBay and Amazon don’t disclose income from merchandise sales, Flipkart India, the website’s wholesale arm, said sales more than doubled to Rs 2,846 crore in the year ended March 2014, against Rs 1,180 crore in the previous year.

Experts feel that the aggressive strategy of Flipkart, Snapdeal and Amazon has affected most others including eBay.

"These three companies are playing a game for market dominance and their aggressive stance has taken options away from rivals," said Devangshu Dutta, CEO at retail consultancy Third Eyesight.

"These Indian players (Flipkart and Snapdeal) are funded well to continue that strategy while Amazon seems to have clearly seen a huge opportunity in India," he added.

In July, Amazon announced it would invest $2 billion (approx Rs 12,400 crore) in the company’s India operations that have exceeded gross merchandise sales of more than $1 billion within a year of the launch.

San Jose-based eBay bought local auction platform for $55 million (about Rs. 344 crore) to enter India back in 2004, at a time when online retail was unheard of in most of the country.

The Indian e-commerce industry picked up in a big way in the last couple of years, triggered by deep discounting strategy from newer players even if that meant incurring heavy losses.

Soaring sales and rising losses bear witness to this. Combined losses of Bangalorebased Flipkart, Delhi-based Snapdeal and Amazon India was more than Rs 985 crore for the last fiscal. Flipkart and Snapdeal — which counts eBay, Azim Premji and Ratan Tata as investors — together sold goods worth more than $4 billion. eBay India has been mostly lying low and hasn’t been actively participating in recent mega sale events. Yet, the company has posted Rs 83 crore net loss during year to March 2014, a 15% increase from a year ago period.

Frequent change in its leadership team may have also affected eBay. Its current managing director Latif Nathani is its fourth India head in the past five years.

Parent company eBay Inc is trying to sort out issues in its home market by spinning off its PayPal unit into a separate business in an attempt to negate the slowing growth of traditional marketplace business.

Experts, however, aren’t discounting eBay India yet and feel the Indian online retail market, which is estimated to grow over four-fold to touch $14.5 billion (over Rs 88,000 crore) by 2018 can absorb a handful of large players including eBay.

(Published in The Economic Times)