Aurum Insights · Aurum Insights Internet Related Businesses _____ Annual Newsletter 2015 Aurum...
Transcript of Aurum Insights · Aurum Insights Internet Related Businesses _____ Annual Newsletter 2015 Aurum...
Aurum Insights Internet Related Businesses___________________________Annual Newsletter 2015
Aurum Equity Partners LLP
“Large horizontal e-commerce players attracted substantial funding, with Flipkart and Snapdeal
leading the pack. Flipkart raised an aggregate of US$ 1.9 billion across 3 rounds involving new as
well as existing investors. Snapdeal also attracted large sums with total investment of US$ 860
million across 3 rounds. Alibaba’s major shareholder Softbank marked its entry into Indian e-
commerce market with a major investment (US$ 627 million) in Snapdeal, making the battle for
domination more interesting. ”
Read more on the M&A action in this issue.
“Fund raising momentum is expected to sustain in 2015,with investors placing long term bets on India’sconsumption story and favorable demographics. Aurumbelieves that companies will continue to spend large sumsof capital to reach out to a larger consumer base throughincreased marketing budgets and discounts.”
Anshul GuptaAurum Equity Partners LLP
‘Internet related Businesses’ was one of the most active sectors in terms of deal activity inIndia in 2014. The combination of a large user base and low penetration is leadinginvestors, both global and domestic, to allocate large sums of capital, with no signs ofmoderating in the near term. Telecom giant Softbank pledged an investment of US$ 10billion in India’s telecom and e-commerce space. Also, Beenos, the global incubation andinvestment wing of Japan’s largest e-commerce conglomerate Netprice.com, was reportedto be eyeing investments in the Indian e-commerce market.
India boasts of the third largest Internet user base globally, estimated at 213 million andexpected to reach 564 million by 2020. The behavioral shift towards online is driving thedemand for Internet-based products and related services. In just 5 years, the e-commercemarket has grown five folds, from US$ 2.5 billion in 2009 to US$ 13 billion in 2013. Thesector is still in its infancy, with online retail accounting for only less than 1% of thecountry’s retail market, indicating significant headroom for growth.
Mobile represents an integral part of this internet story and is likely to play a key role inexpanding penetration. The primary mode of internet access for consumers in India isgoing to be through the mobile, particularly in the Tier 2/3 cities.
2Private and Confidential For limited circulation only
3Private and Confidential For limited circulation only
Larger horizontal e-commerce players attracted substantial funding, with Flipkart andSnapdeal leading the pack. Flipkart raised an aggregate of US$ 1.9 billion across 3 roundsinvolving new as well as existing investors. Snapdeal also attracted large sums with a totalinvestment of US$ 860 million across 3 rounds. Alibaba’s major shareholder Softbank,marked its entry into the Indian e-commerce market with a major investment (US$ 627million) in Snapdeal, making the battle for domination more interesting. Amazoncommitted US$ 2 billion for its India expansion plans. Horizontal players are investingconsiderable resources to bring more users to transact online. This is resulting in theemergence of increasing number of new product categories, thereby driving rapid growth.
Niche vertical-focused companies are trying to capitalize on these new categories andscaling up quickly – Urban Ladder (raised US$ 20 mn) and Pepperfry (raised US$ 15 mn) inFurniture, First Cry (raised US$ 15 mn) in baby products, Lenskart (raised US$ 25 mn) ineye-wear, Bluestone (raised US$ 10 mn) in jewellery are some examples. Investors alsoplaced their bets on other online categories such classifieds (Zomato, Quickr and Olx), realestate portals (Commonfloor and Housing.com), cabs (Ola and Taxiforsure) and Travel(Stayzilla and HolidayIQ).
Private equity funds also demonstrated inclination to invest in companies that provideservices to E-commerce companies such as payments, logistics, packaging and supplychain management. E-commerce logistics company, Delhivery raised US$ 35 mn in 2014.
On the M&A side, larger players acquired niche companies either to consolidate theirdomestic presence or enter newer geographies. Zomato led the race in overseasacquisitions, acquiring companies in Czech Republic, Slovakia and New Zealand. Zomato’sglobal ambitions are expected to set an example for other product start-ups to thinkbeyond India. Rocket International incubated global company Foodpanda also acquiredentities in Serbia, Croatia and Hungary.
4Private and Confidential For limited circulation only
Large horizontal players consolidated their domestic presence acquiring smallercompanies in a bid to provide end-to-end product portfolio/ services. Flipkart acquiredMyntra Designs to strengthen its apparel division in a US$ 330 million transaction. Amazonwas also reported to be in talks to acquire Jabong for US$ 1.2 billion. In another smallertransaction, Snapdeal acquired Wishpicker.com, an online gift recommendation portal.
Fund raising momentum is expected to sustain in 2015, with investors placing long termbets on India’s consumption story and favorable demographics. Aurum believes thatcompanies will continue to spend large sums of capital to reach out to a larger consumerbase through increased marketing budgets and discounts. Also since there is an increasingrecognition of mobile as the next engine for growth, a lot of transaction activity isexpected in the Mobility space. Niche ventures which allow consumer facing companies tomake their back-end more efficient or add value to buyers/ sellers should attract investor’sattention. Emerging categories such as cab aggregators, financial products distribution,innovative travel solutions and other new categories, having consumption as anunderlying theme will also garner investor interest.
Aurum believes there will be increased M&A activity, with consolidation picking up pacethis year. Larger companies will aggressively scout for companies that can offer themopportunities to outdo competitors or boost growth. Companies offering related servicessuch as loyalty programs, payment gateways, logistics, customer analytics etc. areexpected to catch attention of larger players and get acquired. Also horizontal e-commerce players are expected to plug their portfolio specific gaps through acquisitions.
5Private and Confidential For limited circulation only
Date Company InvestorsAmount
(US$ mn)
26/12/2014 Policy Bazaar
PremjiInvest, Tiger Global Management
LLC, Inventus Capital Fund II, Iconiq
Capital
63
22/12/2014Flipkart Online Services
Private Limited
Tiger Global Management LLC, Qatar
Investment Authority, GIC Singapore, DST
GLOBAL,T. Rowe Price Associates,
Steadview Capital, Baillie Gifford,
Greenoaks Capital, Iconiq Capital
700
16/12/2014 Housing.com
Qualcomm Ventures, Helion Advisors
Private Limited, SoftBank Corp, DST
GLOBAL, Nexus Venture Partner, Falcon
Edge Capital
90
26/11/2014PayMate India Private
LimitedLightbox Ventures I 30
19/11/2014Zomato Media Private
Limited
Sequoia Capital India, Info Edge (India)
Limited, Vy Capital60
28/10/2014 Snapdeal
Temasek Holdings Advisors India Pvt. Ltd,
PremjiInvest, SoftBank Corp, BlackRock
Private Equity Partners, Myriad Asset
Management Company (Honk Kong),
Tybourne (Hedge fund), SoftBank Internet
and Media Inc
627
27/10/2014 Olacabs SoftBank Corp 210
13/10/2014 CarTrade.com
Canaan Partners, Warburg Pincus
International, Tiger Global Management
LLC
30
25/9/2014 Commonfloor Tiger Global Management LLC 30
Select Fund Raising Transactions – 2014
6Private and Confidential For limited circulation only
Select Fund Raising Transactions – 2014
18/9/2014 Quikr India Private Limited
Matrix Partners India, Norwest Venture
Partners, Omidyar Network India Advisors
Private Limited, Warburg Pincus
International, eBay Inc., Tiger Global
Management LLC, Investment AB
Kinnevik, Nokia Growth Partners
60
16/9/2014 Power2SME
Inventus Advisory Service (I) Pvt. Ltd, Accel
Partners, Kalaari Capital Advisors Private
Limited
7
12/9/2014 BigBasketAscent Capital, Zodius Capital, Lionrock
Capital, Helion Venture Partners LLC33
27/8/2014Zoomin Online India
Private Limited
First Round Capital, Lightbox Ventures,
Gund Investments8
21/8/2014 Taxiforsure
Helion Venture Fund II, Bessemer Venture
Partners, Helion Advisors Private Limited,
Accel Partners
30
12/8/2014 Foodpanda Rocket Internet 60
24/7/2014Flipkart Online Services
Private Limited
T. Rowe Price International Inc, Tiger
Global Management LLC, Accel Partners,
Naspers, GIC, DST GLOBAL, Morgan
Stanley
1,000
16/7/2014Urban Ladder Home Decor
Solutions Private Limited
Kalaari Capital Advisors Pvt Ltd., SAIF
Partners, Steadview Capital20
10/7/2014 Olacabs
Matrix Partners India, Sequoia Capital
India, Tiger Global Management,
Steadview Capital
42
19/6/2014 Housing.com
Qualcomm Ventures, Helion Advisors
Private Limited, Nexus India Capital
Advisors Private Limited
19
18/6/2014 Bookmyshow SAIF Partners,Capital18, Accel 25
7Private and Confidential For limited circulation only
Select Fund Raising Transactions – 2014
9/6/2014 FashionAndYou
Norwest Venture Partners, Intel Capital,
Sequoia Capital India, Nokia Venture
Partners, Smile Group
10
27/5/2014 Policy Bazaar Unknown Investors 20
27/5/2014 Pepperfry.comNorwest Venture Partners, Bertelsmann
India Investments15
26/5/2014 Snapdeal
Tiger Global Management LLC, Naspers
Limited, Accel India Venture Fund III,DST
GLOBAL
210
21/5/2014 Snapdeal
Temasek Holdings Advisors India Pvt. Ltd,
PI Opportunities Fund I, BlackRock, Myriad
Asset Management Company (Honk
Kong), Tybourne (Hedge fund)
100
6/5/2014 LimeRoad.com
Matrix Partners India, Tiger Global
Management LLC, Lightspeed Venture
Partners VIII Mauritius
15
17/4/2014 Taxiforsure
Helion Venture Fund I, Bessemer Venture
Partners, Blume Ventures Fund I, Accel
India Venture Fund III
10
18/3/2014Bluestone Jewellery And
Lifestyle
Accel India Venture Fund III, Saama
Capital, Kalaari Capital9
12/3/2014 Quikr India Private Limited
Matrix Partners India, Norwest Venture
Partners, Omidyar Network India Advisors
Private Limited, eBay Inc., Nokia Venture
Partners, Investment AB Kinnevik
90
28/2/2014 Snapdeal
Bessemer Venture Partners, eBay Inc.,
Intel Capital, Saama Capital India Advisors
LLP, Kalaari Capital Partners II, Nexus
Venture Partner
134
5/2/2014 Foodpanda Phenomen Ventures 20
8/1/2014 Firstcry Vertex Venture Management Pte Ltd 15
8Private and Confidential For limited circulation only
Select M&A Transactions – 2014
Date Target Acquirer Size
18/12/2014 Donesi.com Foodpanda NA
18/12/2014 NetPincer Foodpanda NA
18/12/2014 Pauza.hr Foodpanda NA
11/12/2014 Wizmunk Gifting Services Snapdeal NA
21/11/2014 BuyNBragUrban Ladder Home Decor
Solutions Private LimitedNA
18/11/2014 TastyKhana Foodpanda NA
13/11/2014 Meals On Wheels Antfarm Business Incubator NA
30/09/2014 Gaadi.com CarDekho NA
22/08/2014 Lunchtime.cz Zomato Media Private Limited 1
22/08/2014 Obedovat.sk Zomato Media Private Limited 2
01/07/2014 Menu Mania Limited Zomato Media Private Limited 1
28/05/2014 Coupondunia Media Times Internet Limited NA
21/05/2014Myntra Designs Private
Limited
Flipkart Online Services Private
Limited330
14/05/2014Infibeam Digital
Entertainment
Sony Music Entertainment India
Private LimitedNA
30/04/2014 Cleartrip Private LimitedConcur Technologies, Lightbox
Ventures INA
14/03/2014 Dhingana Entertainment Rdio Inc NA
07/02/2014 Musicfellas Entertainment Times Internet Limited NA
The Aurum Perspective on select transactions -
In May 2014, Flipkart acquired online fashion retailer Myntra for a consideration of ~
US$ 330 mn to create one of the largest ecommerce stories in the country. Deal was
structured with a holding company in which the founders of the two companies and
their investors and employees will hold stakes. Both companies had three common
investors Tiger Global, Accel Partners and Belgian family office Sofina who are said to
have played a major role in stitching together the transaction.
Aurum Perspective
Flipkart acquired Myntra, the market leader in high margin apparel segment to consolidate its
presence in the Indian e-commerce space. Prior to the transaction, Myntra had a market share of
30% in the apparel segment, compared to Flipkart’s 20%. Aurum believes the transaction to be a
win-win for both the companies as it provided Myntra’s shareholders with a huge upside that
Flipkart offers with its large end-to-end addressable market and provided Flipkart a head start to
Amazon in terms of apparel category.
9Private and Confidential For limited circulation only
The Aurum Perspective on select transactions -
In December 2014, Flipkart raised its last round of funding for the year, pegged at US$
700 million. With this, it also filed an application with Singapore based companies'
regulator ACRA to become a public company, as it is a mandatory procedure for all
companies where the number of shareholders exceeds 50. This round of funding added
new investors - Baillie Gifford, Greenoaks Capital, Steadview Capital, T. Rowe Price
Associates and Qatar Investment Authority on Company's board.
Aurum Perspective
Flipkart raised an aggregate of US$ 1.9 billion in 2014, with investors queuing up to
participate in India’s e-commerce space. Flipkart is one of the front runners in the online
space and is anticipated to be the biggest beneficiary of the internet revolution that we are
witnessing. Company was the first one to break the volume and velocity barrier by
innovating on business model – Cash On Delivery (COD), investment in logistics
infrastructure etc. This is evident from the fact that the Company sold products worth INR
6, 500 million in 10 hours in a special one-day event - "The Big Billion Day". According to
press reports, Flipkart’s valuation increased from US$ 7 billion in June 2014 (when it raised
US$ 1 billion fresh funding) to US$ 10 billion in December 2014 (when it raised US$ 700
million). Aurum believes Flipkart will continue to attract more capital, in its bid to
dominate India’s high potential e-commerce market and is one of the best positioned
domestic players to take on international giants such as Amazon.
10Private and Confidential For limited circulation only
The Aurum Perspective on select transactions -
In October 2014, Japanese telecom and internet firm SoftBank Corp. invested US$ 627
million in Indian e-commerce marketplace Snapdeal.com, making it the largest
shareholder in the firm. The deal was routed through SoftBank Internet and Media, Inc.
(SIMI), a new unit created under Nikesh Arora (former top official at Google). Snapdeal
plans to use these funds to ramp up its efforts in technology and supply chain
management, in addition to making three-four strategic acquisitions, specifically in the
area of mobile technology. Snapdeal also received funding from Ratan Tata earlier this
year.
Aurum Perspective
Snapdeal raised close to US$ 1 billion this year in its bid to dominate India’s e-commerce space.
The Company reduced the gap with Flipkart, roping in an international giant such as Softbank,
lending a new credibility to its business model and operational prowess. With Flipkart, Snapdeal
and Amazon battling it out for domination, these companies will continue to spend large sums of
capital on marketing/ promotions to build customer loyalty and in the process attract lots of
investor’s money.
11Private and Confidential For limited circulation only
The Aurum Perspective on select transactions -
In October 2014, Taxi service aggregator Olacabs raised US$ 210 million from Japan's
SoftBank Corp at a valuation of nearly US$1 billion. Ola, which is now launching its
service in one city every two weeks, claimed to have around 33,000 cars on its platform.
In about three and a half years since inception, it has built a presence in 19 cities so far.
Company also counts Tiger Global, Matrix Partners and Steadview Capital as its
investors.
Aurum Perspective
Softbank’s investment in Ola Cabs marks an interesting development where a global investor
backed an Indian company to compete with a global giant (Uber). ‘Online cabs’ space is changing
the way people commute locally and is going through an extremely high growth phase. Business
models have shifted from asset heavy radio taxi companies (Meru, Easy Cab) to asset light online
aggregator companies (OIa, Taxiforsure, Uber). As per estimates, this segment is valued at INR 11
billion annually and is growing at 35%. Estimates predict presence of 500,000 to 1 million cabs in
India, with 98% of them operating in the unorganized segment.
Aurum believes there is a huge market opportunity in this space and two domestic players Ola Cabs
and Taxiforsure (was in talks to raise US$ 180-240 million in Nov 2014) are best positioned to take
advantage. Multinational giant Uber, with all its recent problems, is also expected to pose a stiff
challenge.
Note: In line with ‘domestic consolidation’ theme, Ola Cabs is said to be in discussions to acquire
Taxiforsure for US$ 150 million.
12Private and Confidential For limited circulation only
The Aurum Perspective on select transactions -
In November 2014, restaurant search and discovery portal Zomato raised US$ 60 million
in a fresh round of funding from new and existing investors, valuing the company at US$
660 million. Funding round was led jointly by existing investor Info Edge (India) Ltd and
new investor Vy Capital, with participation from Sequoia Capital. Company plans to use
the funds to accelerate its global expansion and develop new products. In the past,
Zomato has raised US$ 53 million from Info Edge (India) Ltd and Sequoia Capital over
multiple rounds.
Company made four overseas acquisitions in Czech Republic, Slovakia, Poland and New
Zealand, rapidly enhancing its global presence. Zomato is focusing on expanding
presence in Europe and prefers to acquire and partner with a dominant local player.
Aurum Perspective
Zomato envisages to be a global restaurant discovery player and competes with NYSE listed Yelp.
Company has been growing rapidly through both organic and inorganic route and has presence in
18 countries till now. With the latest funding round, Zomato plans to expand to 14 more countries
across Europe, South-East Asia, Australia, and the Americas. Aurum believes Zomato will continue
to attract capital and expand quickly as it has already passed the initial learning curve and the
Company is poised for strong growth in the next 2-3 years.
13Private and Confidential For limited circulation only
The Aurum Perspective on select transactions -
In December 2014, real estate listing portal Housing.com raised US$ 90 million in fresh
funding, led by SoftBank Corp., with participation from New York-based hedge fund
Falcon Edge Capital and existing investors. Housing plans to use the funds to map 40
million houses across 300 cities, in addition to providing ‘on’ and ‘off’ buttons to home
owners and agents that will convert all the curated house database into assets for
Housing.com and can be reactivated when they are again available in the market.
In June 2014, Housing had raised US$ 19 million in funding from Helion Venture
Partners, Nexus Venture Partners and Qualcomm Ventures. Previously, it had raised US$
2.5 million in its pre-Series A funding from Nexus. Earlier, it had attracted two rounds of
angel funding.
Aurum Perspective
Housing.com is pioneering the real estate classified market in India with its innovative and
technology-oriented product offering. Housing was India’s first map based real estate search portal
founded on the lines of NASDAQ listed Zillow in US. Company is redefining the product scope in its
category with newer features such as Slice View technology (augmented reality feature to the
homes-booking feature) and a platform that enables users to create and customise their rental
agreements online. Aurum believes Housing is best positioned to leverage the increasing use of
online channel in real estate related transactions and is set to attract more capital as it grows in
terms of geographic coverage and product offering.
14Private and Confidential For limited circulation only
Aurum was established, as a mid-market focused; transaction oriented; investment banking firm,
by a team of professionals with decades of experience in investment banking, private equity and
general management.
Aurum advises clients on M&A, Divestitures, Fund Raising and Restructuring, focusing on
sectors that are in the high-growth trajectory. The Aurum team’s experience in handling large
and complex transactions helps in accelerating the speed of response that the Client needs to
demonstrate, in order to close transactions in a competitive environment. We have the ability to
structure deals derived from understanding the client's strengths and constraints, further
enabled by understanding of market trends and relevant regulatory environment.
www.aurumequity.com
For any further queries and information, please write to us at [email protected]
15
Disclaimer: This report is presented solely for the internal use of the recipient to whom it is marked byAurum Equity Partners LLP (‘Aurum’) and does not carry any right of publication or disclosure to any otherparty. This report has been prepared on the basis of information obtained from publicly available,accessible resources. Aurum has not independently verified all the information given in this report. NeitherAurum nor its affiliates, partners, directors, employees, agents or representatives, shall be responsible orliable in any manner, directly or indirectly, for the contents or any errors or discrepancies herein or for anydecisions or actions taken in reliance on the report.
Private and Confidential For limited circulation only