The $3.1-billion Indian e-commerce space, which has seen young entrepreneurs start and grow businesses selling everything from apparel to real estate, is finding increased endorsement from marquee business leaders who are committing personal wealth to fund growth in this sector.
The latest business leader to turn investor in the Indian e-commerce space is Ratan Tata, chairman emeritus of the salt-to-software Tata Group, who picked up a minor stake in online marketplace Snapdeal.com on Wednesday for an undisclosed sum. Some of the other well-known business leaders to have invested in Indian e-commerce include Wipro chairman Azim Premji and Infosys chairman emeritus NR Narayana Murthy.
“This is a very proud and exciting moment for the entire Snapdeal family. An investment by a legendary and respected figure like Mr Tata is an excellent validation of our focused strategy on building a long-term enterprise and marks the start of a very important phase for the company,” Snapdeal’s co-founder and chief executive Kunal Bahl said on Wednesday.
IT pioneers Premji and Murthy have already extended the turf war between Wipro and Infosys in the $118-billion domestic IT industry to e-commerce. Murthy’s private investment firm Catamaran Ventures had announced in June a joint venture with global e-commerce major Amazon named Taurus Business and Trade Services, where Catamaran will hold a 51% stake and Amazon the rest.
Besides also being an investor in New Delhi-based Snapdeal, Premji led a $50-million investment round through his family office, Premji Invest, in online fashion retailer Myntra.com. Myntra was later acquired by another online marketplace, Flipkart.com.
Industry experts state that the involvement of such marquee investors in e-commerce is a big endorsement of the credibility of the sector and is likely to spur future investments as well as mergers and acquisitions (M&As) in the segment.
A number of online retail ventures raising significant sums of money from investors, mostly private equity funds, have led some to question the valuations being ascribed to such businesses. This is because while these ventures are clocking higher revenues every year, they are yet to turn in profits.
Ratan Tata’s decision to invest in Snapdeal came a day after the company announced a tie-up with Tata Value Homes to sell apartments across five Indian cities: Mumbai, Pune, Ahmedabad, Bangalore and Chennai.
Murthy and Premji realise the value in backing new ventures in a sunrise sector, being veterans of the Indian information technology (IT) industry themselves. When they started building their IT ventures in 1980s,