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E-Commerce Industry Analysis

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E-Commerce Industry Analysis

  1. 1. Bottom-up Approach THE RISE & RISE OF E-COMMERCE - SECTOR OVERVIEW SPECIFIC RECOMMENDATIONS ITM - EMBA (Finance) - Batch 34
  2. 2. Table of Contents  E-commerce sector in India  Evolution  Types  Holistic  Graphs  Key Drivers of Growth  Global Scenario  SWOT of the sector  Info Edge  Just Dial ITM - EMBA (Finance) - Batch 34
  3. 3. Evolution of E-commerce Business Launch of internet in India dialup in 6 cities Launch of online job portals Launch of online B2B portals Launch of online matrimonial sites Muted activity in the industry due to the dotcom bubble bust in 2000 Launch of online agents (OTA) Launch of first group buying website in India New trend of use networking sites as a marketing toll begins or the advent of social commerce Entry of a number of players in e- tailing segment Aug 1995 1996 1997 2000 2005 2006 2007 2010 1st Wave (1996-2000) 2nd Wave (2006- present) ITM - EMBA (Finance) - Batch 34
  4. 4. Types of E-commerce transaction ITM - EMBA (Finance) - Batch 34
  5. 5. A Holistic View THEN Internet user base close to 5.5m in 2006 Average time spent online by an Indian consumer per month 2.6 hrs in 2006 No 3G spectrum auction in India till 2010 Number of credit card and debit card in India 4.2m and 0.3m respectively in 1999 Number of broadband subscribers as low as 51,000 in 2001 Number of users transacting online 3 million in 2007 NOW Internet user base close increased to 300m Average time spent online by an Indian consumer per month 21 hrs in 2015 3G subscribes to reached 118m in 2014 and 303.4m by 2020 Number of credit card and debit card in India 73.7m and 350m respectively in 2014 Number of broadband subscribers reached 100m by 2014 and more then 300m by 2020 Number of users transacting online 38 million in 2014ITM - EMBA (Finance) - Batch 34
  6. 6. Graphs reveal all……… Break-up of Indian E-Commerce Industry Online Buyers as % of internet users ITM - EMBA (Finance) - Batch 34
  7. 7. Graphs reveal all……… E-commerce Industry in early stages in India……. E-Commerce Industry as % of country’s GDP (2013) ITM - EMBA (Finance) - Batch 34
  8. 8. Key Drivers of growth in Indian E-Commerce Sector Increased Internet Usage • Number of Internet users to crossed USA • Rural areas showing 58% CAGR growth rate for internet adoption Favorable Demographics 300m middle class • Rapidly growing middle class • Rising levels of urbanization Increased Mobile penetration • Mobile users have higher frequency of access • Urban users contributing lion’s share of Indian mobile users • Mobile internet users have grown by 2.7x in the last 18 months ITM - EMBA (Finance) - Batch 34
  9. 9. Key Drivers of growth in Indian E-Commerce Sector Better accessibility to Internet • Due to new technological development users have faster access to internet • Data rates have come down internet usage is affordable Hardware accessibility • Cost of PC’s, laptop and other hardware devices have become reasonable • Single largest contributor to the success of E-Commerce is affordable android devices Safe Payment Gateway • Safe payment gateways give confidence and assurance to internet shoppers • There are several payment options to choose from • Cash on delivery is an instant hit with the Indian online shoppers ITM - EMBA (Finance) - Batch 34
  10. 10. SWOT Analysis of the Sector Strengths • Less Capital Intensive • Venture capital willing to fund, less debt burden of these co’s • Different models of business is already tried and refined in the west Opportunities • Job creation • Scope for overall infrastructure development • Tier I – Tier II cities are untouched • Head room for growth due to favorable demographics • Growth directly related to spending power which is increasing Weakness • No entry barriers • Fierce competition • Margins are thin • Allied sector not very well developed • Bargaining power of firms is less • Overdependence on technology • These co’s trade at high multiples Threats •Change in government rules, currently no specific rules for this space • Fragmented too many players • Threat of substitute / new entrants • Scope for misuse of confidential information • Threat of takeover is highITM - EMBA (Finance) - Batch 34
  11. 11. INFO EDGE Company Profile • The Company was incorporated on May 1, 1995 under the Companies Act, •1956 as Info Edge (India) Private Limited. and converted into a Public Limited on •April 27, 2006. • Info Edge is largely known for its recruitment portal Naukri.com in India. It was •the first listed internet-based player on Indian bourses. Executive Summary Sanjeev Bikhchandani, Founder and Executive Vice Chairman – Founded the company in 1995 and previously worked with Lintas and GSK. Hitesh Oberoi, Managing Director and CEO – Joined the company in 2000 and has worked with HLL previously. Ambarish Raghuvanshi, CFO. Joined the company in 2000 and has worked with Bank of America and HSBC previously. Particulars Data CMP 800.50 Mkt Cap 5348.72 CR 52 Week High – Low 1015 – 523.70 Face Value Rs. 10 Traded Volume (shs) 91,111 Ticker BSE 532777 Ticker NSE NAUKRI 51%29% 11% 0.27%5% 4% Shareholders as on 31 March 2014 Promoters FII MF & UTI Corporate Bodies Indian Public Individuals Others Promoters continue to hold 51% Major shareholder is HDFC MF which holds close to 7%. Other prominent shareholders include funds like T.Rowe Price, SBI MF & ITM - EMBA (Finance) - Batch 34
  12. 12. Info Edge Recruitment (Naukri) Real Estate (99acres) Matrimony (jeevansaathi) Education (shiksha) Business Verticals INFO EDGE 74% 7% 15% 4% Revenue Mix Recruitment Matrimony Real Estate Education and others Hit 52 week high on 24 Nov 2014 on the hopes of higher valuation of 99 Acres ( 24 Nov 2014) Less than expected full year results ( 8 May 2014) ITM - EMBA (Finance) - Batch 34
  13. 13. INFO EDGE Strengths •First mover advantage in various categories •Recruitments, contributing ~77% of company revenues, is ~50% EBITDA margin business •No debt and cash generating business Weaknesses • Low barriers to entry • Failure to adapt to newer technological shifts • Competition • Over dependence on one segment Opportunities • Rising internet penetration • Improving macroeconomic conditions • Strong growth in Mobile platform. Threats • Technological obsolence • Competing products from new or existing players ITM - EMBA (Finance) - Batch 34
  14. 14. INFO EDGE PAT to Sales Debt to Equity Ratio Cost Break- up 0 500 1000 1500 2000 2500 3000 3500 1370 1672 1968 516 577 662 442 626 761 Other expense Advertising and promotion cost Employee benefit expense 2012 2013 2014 3771 4372 5059 0 1000 2000 3000 4000 5000 6000 2012 2013 2014 Sales PAT 1442 1498 1668 1300 1350 1400 1450 1500 1550 1600 1650 1700 2012 2013 2014 EBITDA EBITDA 0 200 400 600 800 1000 1200 2012 2013 2014 546 1092 1092 2.8 4.8 4.4 Equity (INR in Million) ITM - EMBA (Finance) - Batch 34
  15. 15. Company Profile Just Dial is a “local” search engine company in India, incorporated in 1993 as A&M communications by Mr. V.S.S Mani. It started offering local search services in 1996 under the Just Dial brand. Just Dial's search service is available to users across multiple platforms, such as the internet, mobile Internet, over the telephone (voice) and text (SMS) Just Dial is the largest online classifieds player in India with 15million listings and 45million reviews. The company IPOed in June’13; it was listed at Rs.530 Management and Directors’ background Mr. V.S.S. Mani, Managing Director – Founder and an industry veteran with over 25 yrs of experience in media and local search services. Mr. V. Krishnan, Executive Director– Co-Founder and has over 20 yrs of experience in strategic planning and execution. Mr. Sandipan Chattopadhyay, CTO. Over 16yrs of experience in technology services and been with Just Dial since 2009. Mr. Ramkumar Krishnamachari, CFO. Over 22yrs of experience in finance and accounting Particulars Data CMP 1322.05 Mkt Cap (crs) 3390.73 52 Week High – Low 1894 - 982 Face Value Rs. 10 Traded Volume (shs) 348032 Ticker BSE 535648 Ticker NSE JUSTDIAL Justdial ITM - EMBA (Finance) - Batch 34
  16. 16. 32.89% 27.38% 4.71% 35.02% Shareholding pattern Promoters FII DII Non institutions/Pub c Top Shareholders: • Tiger Global • SAIF II Mauritius • Sequoia capital Justdial Board nod for hiking FII holding limit (5 Aug 2014) The sharp selloff in Just Dial has come amid fears of redemption by pre-IPO investors, whose lock-in period expires on June 5, 2014. This could put a large number of shares in the open market (6 May 2014). ITM - EMBA (Finance) - Batch 34
  17. 17. Strengths • First mover advantage in the category. • Profitable business model, • No debt and cash generating business. • Access through multiple platforms. Weaknesses • Low barriers to entry • Potential failure to adapt to newer technological shifts Opportunities • Strong growth and increased penetration rate in the Mobile platform are the biggest opportunities for the company. Threats • Technological obsolence. • Competing product from new or existing players Justdial ITM - EMBA (Finance) - Batch 34
  18. 18. PAT to Sales Debt to Equity Ratio Price to Earning (PE) Justdial 2621 3628 4613 0 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 2012 2013 2014 Sales PAT 672 1008 1422 0 200 400 600 800 1000 1200 1400 1600 2012 2013 2014 EBITDA EBITDA 0 100 200 300 400 500 600 700 800 2012 2013 2014 531 695 702 0 0 0 Equity (INR in Million) Debt (INR in Million) 158 148 87 2012 2013 2014ITM - EMBA (Finance) - Batch 34
  19. 19. Key Ratios Particulars INFO EDGE Justdial EBIDTA Margin 33.0 30.8 PE 74.4 78.5 EV/EBIDTA 48.4 61.9 ROE 18.4 25 EV/Sales 16 19.1 EPS (RS) 11.77 17.43 Debt/Equity 0.41 0 Recommendatio n HOLD ACCUMULATE ITM - EMBA (Finance) - Batch 34
  20. 20. Summarizatio n ITM - EMBA (Finance) - Batch 34
  21. 21. Thank You Rinki Haldar – 14 Theresa Tumkur - 100 Shital Pawar - 105 Prashant Mirgule - 53 Karunakar Niwate – 52 Shahezad Sakharkar Group Members ITM - EMBA (Finance) - Batch 34

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