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March 6, 2015
Saran Poovanna, The New Indian Express
Bengaluru, 6 March 2015
The
turbocharged e-commerce in India may be staring at its second
round of consolidation with heightened Mergers & Acquisition
(M&A) activity in this space. According to experts, the trend
of M&A is set to grow by leaps and bounds.
“Any acquisition or merger will continue to remain good
for the ecosystem if it creates significant value. Together, with
distinct focus segments on supply and demand, we can continue
to grow the market faster,” Anand Subramanian, Director,
Marketing Communications at Ola Cabs told Express.
Ola acquired TaxiForSure for over $200 million in March 2015.
In the ‘first round’ of consolidation, homegrown Flipkart
bought fashion e-tailer Myntra for around `2,000 crore. Since
then there have been many such acquisitions by e-commerce players.
Even big companies like Infosys are looking for a piece of the
startup pie.
Global consultancy firm PwC has estimated that the sector is expected to grow from $16.4 billion today to over $22 billion by 2015.
The Economic Survey 2014-15 pegged this sector’s growth at 50 per cent in the next 5 years.
“Consolidation is part of the sector and we will see more in the coming days,” said Sangeeta Gupta, Senior Vice-President, Nasscom.
“Consolidation or acquisition by bigger players would help smaller companies with scale,” she said adding this would facilitate a mature market.
E-commerce companies have raised over $4 billion private funding, which have been used for expanding presence and scope and even acquisitions.
Stating that there are two main factors responsible for this, Devangshu Dutta, CEO of retail consultancy, Third Eyesight said that one is that of a push from investors and the other is of acquiring differential capabilities.
“Its faster to acquire a company with a specific capability,” he said and added that if a company waits to build capability organically, then visibility and market opportunity can start to decline.
“Growth can be organic or inorganic,” Anand said and added, “ Inorganic growth in such cases helps leverage strengths that have been built by brands over time.”
On if niche product or technology companies can continue to work without being acquired, Dutta said that this was possible in the long term only.
“In the short term, the environment is tough for niche products companies to sustain themselves,” he said.
(Published in The New Indian Express.)