In India, around 48 startups have already made it to the unicorn club, as per CB Insights data. Well over $38.4 Bn has been raised till December 4th this year, with several of the rounds producing Indian unicorns in 2021. India will manage to get more than 100 unicorns by 2022, much earlier than the previewed estimation of 2023 reports in the past. The pace with which these companies are gaining valuations is truly remarkable. India’s pace of unicorn growth has surpassed that of China. The Indian economy is capitalizing on a host of international and national factors that are expected to create many more such companies.
We aim to identify and bring out such companies at an early stage so that the secondary’s investors can churn out greater returns. In this edition of Indian Soonicorns, we bring out some companies in the E-Commerce space that have complete potential to reach the billion-dollar mark in the future.
The Indian e-commerce industry has been on an upward growth trajectory
The Indian e-commerce industry has been on the rise, and by 2034, it is predicted to overtake the USA as the world’s second-largest e-commerce market. India’s e-commerce market is predicted to expand at a 19% CAGR from $46.2 Bn in 2020 to $111.4 Bn in 2025, with grocery and fashion/apparel set to be the main drivers of further development. Despite lower consumer spending, a slowing economy, and the uncertainties generated by COVID-19, e-commerce players are expected to thrive strongly in 2021. The surge in online users has been seen in many strata of the population in Tier 2 and Tier 3 cities. According to estimates, the growth of digitally native businesses has been fueled by a boost in technology usage among small and medium businesses.
Let us now have a look at potential soonicorns that are likely to give high returns to their investors in the longer run.
Rationale: Pepperfry is an online furniture and home décor shopping store. Pepperfry’s platform has expanded into both online and offline business. The company expects to be in the unicorn club soon in terms of valuation before IPO hits the market for 12 months. The total revenue increased by 27% to $33 Mn in FY20 as the brand has reached close to profitability last year, company’s focus has shifted from achieving profitability to becoming a high-growth company. Despite the intense rivalry it has experienced among all the other platforms researching this area, the online e-commerce company has managed to create a key position in the future industry’s market.
Rationale: Freshtohome is a leader in leveraging AI-based technology and business innovation to bring a superior value proposition to customers and suppliers in a large market. The start-up, which clocked an annual recurring revenue of $85 Mn in FY20, aimed to hit $200 Mn in FY21. Freshtohome manages to sell nearly 10K tones of produce per year and has close to selling 95% qualified cohort retention and doubling every year. It has 12 lakh registered users. The pandemic helped accelerate the online purchase of meat products as consumers took to branded packaged items.
Rationale: Trell is a social-commerce platform for discovering lifestyles through videos in Indian Languages. It enables people to create visual collections of their lifestyle experiences. The social commerce platform has more than 100 Mn downloads and over 50 Mn monthly active users on its app. The start-up is in talks to raise $100 Mn funding, which could value the company between $600 and $800 Mn. A huge majority of people are unable to discover relevant material in their native language. Trell enters the picture at this point.
Rationale: Magicpin drives discovery to local retailers across various industries such as fashion, food & beverage, and grocery establishments. The company had a decent financial performance as it recorded a 2.6X jump in its turnover with a revenue of $28 Mn in FY20. It claims to be making $1 Bn in annual sales for its clients of 15 lakh merchants. The company haS a user base of more than 5 Mn and has expanded its footprints to around 200 cities in India. Magicpin also runs a SaaS product Orderhere.io where it helps merchants to go online in a few minutes. The product also provides logistic support through third-party logistics companies.
Rationale: DealShare is an inventory-led platform that manages the supply chain and logistics in bigger cities. The start-up is in talks with new and existing investors to raise a fresh round at over $1.7 Bn valuation, which will be a more than 2.5X jump in the company’s valuation. DealShare has recorded a seven times growth YoY as its current GMV run rate is $40 Mn per annum, and is expecting top to reach $928 Mn by the year 2024. Currently, it operates in 40 cities of five states and has 20 warehouses. It will increase its footprints to 100 cities and 10 states and also build 200 warehouses by end of this year.
Rationale: Gurugram-based startup Mamaearth is one of the most valued new-age D2C personal care brands that began with a focus on baby-care products, but has pivoted to become a personal care brand. The startup has expanded its product line by introducing 12 products at the beginning of 2020, which led to a 3.7X jump in the company’s total sales of around $66 Mn in FY21 as compared to the previous year’s $14 Mn, and is planning to double the sales by 100% this year. Its current revenue rate is around $100 Mn and is expected to have clock revenue of $265 Mn over the next three years.
India’s Potential to be a Game Changer in the E-Commerce Sector
The recent rise in digital literacy has led to an influx of investment in the sector firms, leveling the market for new players to set up their base, while churning out innovative patterns to disrupt old functioning. 100% FDI is allowed in B2B e-commerce and 100% FDI under the automatic route is permitted in the marketplace model of e-commerce. In 2020, e-commerce and consumer internet companies raised over $8 Bn PE/VC capital spread over 400 deals giving rise to 9 unicorns. At the same time, there have been various initiatives from the government to digitize the traditional offline market and boost the e-commerce sector such as Start-up India, Digital India, Skill India, Innovation Fund, and BharatNet.
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This article has been co-authored Vivek Kumar who is in the Research and Insights team of Torre Capital.
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