The company, the shares of which rose to a record $40.90 on Tuesday on the Nasdaq, will have a war chest of more than $500 million with the completion of its latest round of fundraising, allowing it to take on the likes of Booking.com and newer domestic player Paytm among others, reports Economic Times.

“The fundamental belief was to bolster our arsenal, and to have the war chest available,” said Deep Kalra, chief executive of India’s largest travel operator, which is raising the money as it closes an equity financing round for a 9 per cent stake. “The use of the funds, or proceeds, will largely be inorganic.”

Kalra did not specify exactly how much the Gurgaon­headquartered company plans to set aside for potential acquisitions, but it’s expected to have over $500 million on its books after the latest funding round.

Expected to close on May 5, this will see the company raise $165 million from its existing backers, MIH Internet SEA Pte Ltd, a subsidiary of multinational internet and media group Naspers Ltd, and Chinese travel operator Ctrip.com International. Both investors will maintain their current shareholding, which stands at about 11 per cent for Ctrip and 43 per cent for MIH Internet.

The company will separately raise an additional $165 million through a private placement, under the terms of which it will issue about 4.5 million ordinary shares at $36 apiece.

Morgan Stanley India is acting as sole placement agent for the transaction, it said, without disclosing the identity of the investors. MIH Internet SEA had made a pro rata cash infusion of $82.8 million in MakeMyTrip in February, bringing the total cash and cash equivalents and term deposits of the company to an estimated $236.6 million as down 4.9 per cent, on the Nasdaq on Wednesday morning local time for a market capitalisation of $3.49 billion.

On the prowl

“We want to have a good enough kitty that allows us the flexibility to look at inorganic opportunities,” Kalra said. “We’re still in a scenario, where we are investing in the hotel’s space. Like I have said before, it’s not going to flip overnight, and we have to make sure that we have the fire power to do what it takes, to not only maintain leadership but grow it.”

Kalra engineered the largest M&A deal in the Indian internet space last year by merging his company with closest rival Ibibo Group. MakeMyTrip’s revenue from its hotels and standalone basis, contributing almost 67 per cent to overall revenue for the three months period.

The company is believed to be in talks with a number of ventures for potential investments and outright acquisitions. Last week, The Times of India reported that the Nasdaq­listed company was in talks to invest in smaller rival, online budget hotel operator FabHotels. This interest comes as MakeMyTrip has realised that building a good supply of hotels rooms is important for the business.

“In India, the challenge is not in terms of discovery of hotels, but the quality. That is why the hotels business can be built the way overseas players have built it,” said an investor briefed on the matter.

Global players check in

This comes as global travel operators such as Expedia and Priceline Group­backed Booking.com have set up shop in the country and are rapidly expanding their bouquet of services across the country. Apart from global players, local operators such as Oyo Rooms and Treebo Hotels have established a strong presence in the budget hotels space.

Newer entrants, such as Alibaba Group­backed Paytm have allocated a significant amount of cash to grow its travel business. In March, media reports stated that One97 Communications, which operates Paytm, had earmarked.`300 crore to ramp up its travel marketplace, while also expanding its team to more than 250 over the next twoquarters. “This (market) won’t become a bed of roses overnight,” Kalra said. “There will always be players, Indian or international, throwing their hat in, and hoping to get a piece of this very lucrative pie.”

After the merger with Ibibo Group, MakeMyTrip has also outlined aggressive plans to establish its dominance in the budget hotel segment. The online travel market is expected to grow from $11 billion in FY16 to $18.9 billion by FY20, according to an October 2015 Goldman Sachs report.

In the space, hotel bookings earn 15­20 per cent commission while air travel gets 6 per cent, making hotels a much more profitable proposition. In the last two years, action has shifted to this market.

In an earlier conversation, MakeMyTrip India chief executive Rajesh Magow had said that the company was forecasting up to 75 per cent of its overall top line to come from the hotels and packages segment over the next three to four years.

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Snapdeal, a leading e-commerce marketplace in India, has partnered with Truecaller, an app that helps you identify unknown incoming calls, to enhance consumer experience by integrating Truecaller Priority in the company’s IVR and order confirmation numbers.

Customers with Truecaller app installed on their mobiles will be able to easily identify and filter IVR or delivery verification calls when shopping on the e-commerce platform.

Any calls received by users who have placed an order will be clearly marked as ‘Snapdeal Order Team’ or ‘Snapdeal Delivery Team’, and colour coded in purple.

Jayant Sood, Chief Customer Experience Officer at Snapdeal, said, “This will help reduce a key friction point in the delivery process; ensuring that our customers don’t miss out on any important calls from Snapdeal, and also increase the daily rate of deliveries for us by increasing the call completion rate.”

“We constantly strive to enhance the user experience through safe and efficient products. With Truecaller Priority, Snapdeal ensures enhanced efficiency in its user communications while users get to know that call is critical and for relevant reasons. We are confident that such seamless experience will add immense value to both sides,” said Arun Krishnan, Director, Strategic Partnerships at Truecaller.

In February 2010, Kunal Bahl along with Rohit Bansal started Snapdeal. Today it is one of the top three online marketplaces in India, with a wide assortment of 65 million plus products across 1,000-plus categories from over 125,000 regional, national, and international brands and retailers.

With millions of users and more than 300,000 sellers, Snapdeal delivers to 6,000-plus cities and towns in India. In its journey till now, it has partnered with several global marquee investors and individuals such as SoftBank, BlackRock, Temasek, Foxconn, Alibaba, eBay Inc., Premji Invest, Intel Capital, Bessemer Venture Partners, and Ratan Tata, among others.

Snapdeal is facing tough competition from Amazon and Flipkart. A recent report suggested that it is exploring a merger with Alibaba-backed m-commerce and digital wallet company Paytm.

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The aim behind the government’s action was to combat tax evasion, counterfeiting and corruption. The government claimed that eliminating large denominations would make it harder to hide large amounts of cash. The abrupt nature of the move and the prolonged cash shortages that followed created disruptions throughout the economy, threatening the economic output of the country. The move was heavily criticized as poorly planned and unfair, and was met with protests, litigation, and strikes.

As a result of demonetization and its adverse effects on the economy, The Asian Development Bank cut its growth estimate for India for the financial year ending March 31 to 7% from 7.4%. JP Morgan expects growth to decline by half a percent to 6.7%. The cascading effect of demonetization – drop in sales, layoffs (in sectors like construction, textiles & jewelry) have all taken a big hit on the economy. According to some estimates, the cost for merely swapping out the demonetized currency is around 1.28 trillion rupees, or about $19 billion.

But not everyone lost out, e-wallet firms such as Paytm, Oxigen and MobiKwik turned out to be lucky winners and they won big. As per government data, the number of daily transactions has shot up from 17 lakh (November 8, 2016) to 63 lakh (December 7, 2016), a growth of 271%.

Huffington Post: In a single master stroke, the government has attempted to tackle all three malaises plaguing the economy—a parallel economy, counterfeit currency and terror financing.

According to a study titled Indian m-Wallet Market, within 12 days of the announcement Paytm raked in over 7 million transactions worth Rs 120 crore a day and was doing more transactions than the combined average daily usage of credit and debit cards in India. Now that is some serious business gain, all thanks to demonetization.

A lot of people were thankful for e-wallet firms for helping them tide through the tough days post demonetization, and rightfully so, but they failed to see how with every transaction they were losing the value of their money. Let me explain this using an example:

Mr. X buys Rs. 10,000 worth of goods online and he pays for it using an e-wallet. When the payment gateway receives the money, its charges TDR (transaction discount rate), on an average it will be 2% + service tax on transaction value. So payment gateway takes Rs. 230 ((10000*2%)*(1+15%)) out of Rs. 10,000. In most cases, the company pays 50% (Rs. 115) of its payment charges to the bank and the rest (Rs. 9770) to merchant. Upon receiving payment, the merchant will supply material to Mr. X. When the merchants supplies the product, the cost incurred (Rs. 230) is charged to Mr. X (either directly or by decreasing the value of the product to Rs.9,770 instead of Rs.10,000). Here is a visual depiction of the above transaction:

If we calculate the TDR for a large number of transactions we find that after about 70 transactions, 80% of the initial amount is lost as transaction fee alone (and 90% is lost after 100 transactions). Cash, on the other hand, does not lose its value in transactions. So going cashless does comes with its inherent problems, costs that the average Indian may not be aware about.

Is going cashless completely secure?

Although going cashless does seem like the way forward, we need to stop & think if it is completely secure. In December, Paytm servers were down for 1-2 hours, affecting a very large number of transactions. Paytm, in an official communication has also admitted to some fraudulent Paytm users who were part of an online scam. United Payment Interface (launched by RBI) uses a double factor authentication and is considered more secure according to bankers.

The Wall Street Journal: The long-term effects of India’s demonetization gambit remain unclear, largely because no other major economy has attempted such an experiment except during a crisis. But with growth slowing and job losses rising, the short-term prognosis appears grim.

Some experts feel it is RBI’s inefficiency when people pay small amounts like 10/20/50 using e-wallets, the institution should have done more to distribute smaller denomination notes post-demonetization. e-wallets are similar to carrying a self-signed cheque, very vulnerable to fraudsters. India is far behind other nations when it comes to dealing with debit/credit card frauds, we can only hope it is in a better state for e-wallet hacking and frauds.

Another talking point among experts is ownership, the single largest shareholder of Paytm is Alibaba, the world’s largest e-commerce company that is based in China. Although the idea seems far-fetched there are some who believe that with some pressure, Alibaba could get access to consumer spending and behavior patterns from Paytm. In a world where information is power, this idea should not be taken lightly.

Demonetization may have its pros & cons, and we are all more or less aware of it, but the flip side of it and its boost to e-wallet companies makes for a great case study. Some of the issues that may arise can be addressed:

• The government can revise or enforce existing laws to ensure that parties outside the country (such as Alibaba) do not get access to sensitive data.
• Data security must be regulated by an independent government agency that must set the rules & guidelines and enforce them from time to time. There must be necessary protocols put in place for cases of consumer fraud and the agency must be bestowed with necessary powers to handle such incidents.
• The government can encourage the use of UPIs and use its low transaction fee as a selling point.
• The government must bring about regulation in the transaction rates charged by e-Wallet firms and need to reduce these rates drastically. According to reports, this digital payments market will soon touch 2,000 trillion by FY 2021-22, even a small percentage of this market will be quite substantial.

—

Image Credit: Pixabay

The author is Founder Director of SpingforthCap.com, a full service mid-market investment bank

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With the fresh infusion of funds, Alibaba Group has increased its stake in the company to 50 per cent.

A formal announcement in this regard is expected in the coming weeks.

As per this report which quoted two unknown sources, Alibaba is planning to set up its own B2C retail operations in partnership with Paytm. The new entity will be rebranded to either PayTM Mall or PayTM Bazaar, one of the sources told ET.

Under the current regulatory framework, Alibaba cannot run a B2C arm on its own. The company however runs a B2B retail platform in the country.

Alibaba and its online payments unit Ant Financial aka Alipay had previously injected US$680 million into Paytm in 2015.

Alibaba’s fresh funding will help Paytm to compete with the likes of Amazon and Flipkart, which together hold more than 70 per cent e-commerce marketshare in India.

Paytm, founded in 2000 by Vijay Shekhar Sharma, is an m-commerce company. Apart from the online retail platform, the company also offers mobile advertising, mobile wallet, recharging and marketing solutions. To date, One97 has raised nearly US$1 billion in multiple rounds from a slew of VCs and corporates, including SAIF Partners, Sapphire Venture and Silicon Valley Bank. Ratan Tata is also an investor in the firm.

The company recently launched its payments bank, which can accept deposits from individuals and small businesses of up to INR 1 lakh per account.

Paytm recently appointed K Guru Gowrappan, Global MD of Alibaba Group, to its board as an Additional Director.

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CashKaro.com has released results and infographic of its annual survey titled ‘E-Shopping Revelations 2016’. The survey reports the ever-evolving preferences and behaviour of online shoppers in 2016.

The survey was conducted at a pan-India level and registered more than thousand respondents.

As per this survey, Amazon.in tops in quickest and hassle-free deliveries while Flipkart ranks number one in customer care service.

Key findings of the survey:

• E-commerce portals that offer the best customer care service
  Flipkart
  Amazon.in
• E-commerce platforms that have the quickest and hassle-free delivery
  Amazon.in
  Flipkart
• Payment wallets preferred to pay bills/recharge
  Paytm
  Freecharge
  Mobikwik
• 75% of respondents feel bank card offers add value to the overall sales and discounts. Compared to 2015, we saw bank card offers play a more important role in influencing buying decisions in 2016 and the discounts were also greater
• 59% of respondents think gift cards is a better and convenient way to gift someone
• 50% users feel brand videos/ads have a positive impact on their purchasing decision
• 60% of users like receiving offers from e-commerce sites on their social media accounts like Facebook and Twitter
• 55% of respondents agree that subscription-based services like Amazon Prime, Flipkart First, Snapdeal Gold etc. enhance online shopping experience, though 20% said they would not subscribe to the same
• Compared to last year, 75% have started shopping for daily items/groceries more online now
• Desktop is still the most preferred platform to shop online with 60% of the respondents using the same. Though with increased use of smartphones, 40% of the respondents are transacting via mobile now.

On the survey, Swati Bhargava, Co-founder of CashKaro.com, said: “CashKaro survey is a reflection of how buying habits of the Indian online shopper are changing and increasing importance of softer aspects like fast delivery, prompt customer service, discounts and cashbacks. 2016 was an eventful year for Indian e-commerce.”

“The advent of subscription- based services like Amazon Prime, Flipkart First, Snapdeal Gold etc. helped in enhancing shopping experience while cashback offers became mainstream. Post demonetisation, we saw a great increase in the use of payment wallets and also witnessed an increased number of users using Cashback sites like CashKaro to save on their daily transactions,” she added.

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