As Amazon Looms, Indian E-Commerce Retailers Strike $400 Million in Deals

With Amazon.com Inc ramping up its presence in India, two local online retailers are preparing for tougher competition with separate deals worth a combined $400 million (Rs. 2,360 crores approximately) set to be finalised this week.

Flipkart, India's largest online retailer, is expected on Thursday to announce its acquisition of a majority stake in online fashion retailer Myntra in a deal worth about $300 million (Rs. 1,770 crores approximately), said an official from Myntra who did not want to be named as he was not authorised to speak with the media.

(Also see: Flipkart and Myntra to Merge This Week: Report)

In a separate deal, local online retailer Snapdeal has raised $100 million (Rs. 590 crores approximately) from five investors, a company official said on Wednesday. The deal will be announced in a few days, he said.

The Snapdeal investors include Temasek Holdings, an official with the Singapore state investor said.

The two deals come after Amazon, the world's biggest online retailer, last year slashed prices and rolled-out next-day delivery in a bid to win market share in India's fast-growing e-commerce industry.

"Amazon is scaling up much faster than expected and that is forcing everyone from retailers to investors in these companies to re-think," said Ashish Jhalani, founder of e-tailing India, a retail consultancy.

"The sentiment here at the moment is about survival, it's about now or never," he said.

Bangalore-based Flipkart, set up by two ex-Amazon employees in 2007, has sought to grow its presence in the online fashion segment, a category where Myntra is the market leader.

Tiger Global Management and Accel Partners are investors in both Flipkart and Myntra.

Flipkart and Myntra declined to comment.

Snapdeal, an online marketplace that facilitates transactions between third party suppliers and customers, is set to complete its second round of funding this year by raising $100 million, the company official said.

The official declined to be named and did not provide details. Snapdeal Chief Executive Officer Kunal Bahl was not immediately available for comment.

The Economic Times newspaper, citing an unnamed source, reported on Tuesday that other investors in Snapdeal included BlackRock Inc and Hong Kong-based Myriad Asset Management. Myriad declined to comment and BlackRock did not respond to a request for comment.

The Indian e-commerce market was worth $13 billion in 2013, according to a joint report by KPMG and the Internet and Mobile Association of India, with online travel accounting for over 70 percent of consumer e-commerce transactions last year.

Online sales of retail goods totaled $1.6 billion in 2013, according to research firm Forrester, and are expected to reach $76 billion by 2021, according to consultancy Technopak.

By comparison, China's business to consumer e-commerce sales may surpass $180 billion this year, with industry leader Alibaba readying an initial public offering (IPO) worth more than $15 billion.

© Thomson Reuters 2014