E-commerce fuels India's commercial property boom

NEW DELHI: Internet retailer Amazon and its fast-growing local rivals are driving a boom in commercial property leasing in India as their storage needs rise, with shoppers in the country going online to buy everything from televisions to groceries.

Demand from e-commerce firms, a tiny fraction of India's retail industry, accounted for as much as 40% of 1.7 million square feet of warehouses leased in 2014 -- a seven-fold increase from 2013, according to consultants CBRE South Asia. Warehouse rents have risen by a quarter over the past year.

Other estimates indicate office rents in India's tech hub Bengaluru could rise by as much as a fifth in the next six to nine months as e-commerce companies add to demand.

The result, say developers and analysts, is a speedier than expected recovery for India's commercial property sector, badly dented by two successive years of sub-5% economic growth.

"The best has yet to come for the sector and that will have a snowball effect on the property sector with increased appetite for office space, logistics and warehouse," said Sigrid Zialcita, managing director, research for Asia Pacific at consultant Cushman & Wakefield.

In October, online retailer Flipkart , one of India's largest market place sites, agreed to lease 3.25 million square feet of office space in Bengaluru from developer Embassy Group, making it one of the biggest commercial property leasing deals ever.

"There will be large requirements from these kinds of companies," said Jitendra Virwani, chairman and managing director of Embassy, adding such deals were few, but growing.

While e-commerce companies comprised less than 5% of the 30 million square feet of offices leased in 2014, they are expected to drive demand over the next three to six years.

Uptake of total warehouse space is likely to more than double to 4 million square feet in 2015, as more Indians shop online.

Revenues of e-commerce companies in Asia's third-largest economy are expected to rise to $1.5 to $2 trillion over the next 10 years, says Cushman. India already has the world's third-largest population of internet users.

Among those looking for space is Amazon, which needs a million square feet of offices in Bengaluru, according to property consultants. Amazon had no immediate comment.

Indian classifieds portal Quikr said it is looking for 50,000 square feet. Furniture retailer Pepperfry said it plans to grow its shed space to 3 million square feet by 2017 from 250,000 square feet, while rival FabFurnish said it would more than double its space to 800,000 square feet by mid-2016.

Cushman's Zialcita said that while technology and outsourcing companies will make up the lion's share of demand for now, e-commerce firms will contribute notably in future.

Snapdeal CEO seeks more acquisitions as organic growth takes too long

Hong Kong/New Delhi: Snapdeal, the Indian e-commerce start-up backed by Softbank Corp. and EBay Inc., will keep buying companies as it works toward becoming profitable in two years.

Building everything from scratch is a losing proposition, Kunal Bahl, chief executive officer and co-founder of the five-year-old company, said in an interview.

“We’re not going to be frivolous about it,” he said on the sidelines of a Goldman Sachs Group Inc. technology conference in Hong Kong. “If there’s something we can’t build internally, then we’ll do it. If we want to do everything ourselves, we’ll be too late.”

Bahl said he expects Snapdeal to become profitable in two years, once its investments in logistics and technology infrastructure bear fruit. He has bought 10 companies in the past seven months, including most recently app-developer MartMobi, to capitalize on an acceleration in Indian e-commerce over just the past few years.

Snapdeal is eschewing a one-size-fits-all Amazon-style retail strategy in favor of connecting distinct marketplaces: one for luxury goods, another for consumer products and so on.

Snapdeal and local rival Flipkart are competing with foreign entrants alike such as Amazon.com Inc. in a growing market fueled by cheaper smartphones and rising incomes.

The potential for India’s e-commerce market, a vision stoked by the rapid evolution of China’s, is drawing billions of dollars of investment, spurring startups and boosting valuations.

Growth money

Snapdeal raised 90% of its capital in just the past 11 months and is now valued at about $5 billion, Bahl said. Flipkart’s last round of funding valued it at $15 billion, according to the Wall Street Journal.

A lot of money will go toward the pursuit of growth for now, Flipkart chief financial officer Sanjay Baweja said in an interview on Wednesday.

“There’s a lot of investment which is happening, in increasing reach, increasing scale,” Baweja said on the sidelines of the conference. “There’s a sense of a land grab.”

Soaring valuations have coincided with a persistent lack of profitability.

That’s normal in a market undergoing deep changes. Only about 2% of India’s retail sales is now online, versus the double-digit percentages in other more developed markets.

The growth of online commerce may, for instance, require heavy discounting initially that in turn pressures profitability.

“With every disruption, there’s going to be a bubble created,” Lightbox Ventures Partner Sandeep Murthy said in Hong Kong Wednesday. “To get you to change your behavior, I have to give you an incentive.”

Marketplace model adopted by e-commerce companies just smart accounting: Kishore Biyani, Future Group

NEW DELHI: The founder of India's largest brick-and-mortar retailer Kishore Biyani said the marketplace model adopted by ecommerce companies differs little from conventional methods, questioning the rationale that allows them to raise foreign capital. "There is nothing different about marketplace (from brick and-mortar retail) except for accounting,"Biyani said in an interview.

"They (online retailers) sell to consumers. They are violating the law (on overseas investment) in spirit and in letter."The founder of the Future Group, which runs more than 1,200 stores selling everything from food to furniture, elaborated on his logic.

"All retailers — whether real or virtual — source almost all goods from manufacturers and suppliers,"he said. "Virtual retailers, like real retailers, store most of their merchandise or inventories in their own warehouses. How one treats this inventory in the financial accounts may differ. Some account this inventory on their own balance sheet, others account for it in their suppliers' balance sheet. There are real-world retailers as well who do not account for the inventory on their own books."

That's why there is no real difference in the nature of business between ecommerce and retail chains, Biyani said. And yet, companies that run brickand-mortar stores face stringent curbs when it comes to foreign investments unlike their online counterparts, he said. "Any retailer can be a marketplace and any marketplace is also retailer,"Biyani said.

"In addition, in these so-called marketplaces, sellers do not directly interact nor ship goods directly to buyers. Like real retailers, virtual retailers themselves own or handle the logistics and customer delivery for everything that they sell,"Biyani said.

India bars foreign direct investment (FDI) in any ecommerce venture that sells products directly to consumers but allows 100% foreign capital in the marketplace model, which involves online retailers setting themselves up as platforms for other retailers to sell products. In effect, this means that these companies are selling to consumers and this doesn't count as wholesale trading Biyani said.

"By legal definition, wholesale trading or B2B (business to business) involves selling only to those who own businesses or have sales tax or service tax registration. The websites do not have any B2B or wholesale business,"he said.

"We are not opposed to FDI. We only expect that the law and its implementation are clear so that it applies equally to real and virtual retailers."Biyani's comments are the first public expression of discontent by retailers on the issue, although the Retailers Association of Indialobby group had recently filed a case in the Delhi High Court seeking a level playing field using this argument.

The judge referred the matter to the government to decide in the next four months.

DRIVING FORCE

The increasing adoption of ecommerce by Indians is driving business to Amazon, Flipkart and Snapdeal and hurting brick-andmortar establishments. The prospect of this trend strengthening is also a cause for worry.

But Biyani said virtual retailers aren't taking away "our"business or "our"customers. His argument is more about fairness, given that the flood of overseas money into ecommerce companies allows them to offer discounts to win market share.

The increasing adoption of ecommerce by Indians is driving business to Amazon, Flipkart and Snapdeal and hurting brick-and mortar establishments. The prospect of this trend strengthening is also a cause for worry. But Biyani said virtual retailers aren't taking away "our"business or "our"customers.

His argument is more about fairness, given that the flood of overseas money into ecommerce companies allows them to offer discounts to win market share.

"The growth of virtual retail is not led through brands or products developed by the companies or by achieving operational efficiencies or scale,"he said.

"It is entirely led through reducing the prices of products that are subsidised by the investments made by foreign private equity funds and venture capitalists. On the other hand, retailers in the real world face severe restrictions on fundraising, especially when it comes to foreign funds, whether through external commercial borrowings or through equity.

That isn't fair."Spencer's Retail reported a net loss of Rs 114 crore for FY15. Losses widened because of heavy discounting by ecommerce companies even though Spencer's posted higher revenue, Sanjiv Goenka, chairman of CESC Ltd that owns the retail chain, is reported to have said.

In recent years, homegrown Flipkart and Snapdeal have raised billions of dollars from investors while US-based Amazon has pledged to invest $2 billion in India to tap the country's ecommerce potential. Flush with capital, ecommerce companies have unleashed advertising and discounting strategies. Flipkart and Snapdeal declined comment while Amazon didn't respond to queries. Biyani didn't name any specific company in his comments.

IMPACT ON SMALL STORES

According to Biyani, the impact of ecommerce is mainly on small consumer electronic stores. "A large number of small shops engaged in selling mobile phones and electronics have gone out of business in the past few years and it is entirely due to the deep pockets of the foreign funds subsidising and cutting prices of mobile phones being sold by virtual retailers,"he said.

He pointed out that ecommerce companies are now entering food and groceries in the context of the argument against FDI in retail describing these as sensitive segments.

Allowing overseas money in retail would hurt millions of kirana stores, those opposed to it had said. "The whole debate on FDI in retailing was on protecting small traders, shop owners and farmers engaged in the food business. That's the reason why FDI in retailing was not allowed. But that is exactly where FDI is now coming,"Biyani said.

Online retailers face heat as buyers wait for deeper discounts

New Delhi: Their getting-a-better-deal instincts whetted by the hefty discounts offered on e-commerce websites, customers are staying away from online sales dangling 20-40% rebates, preferring to wait for the 50-80% sales that are inevitable as online retailers chase higher market share and revenue at any cost.

E-commerce sites Myntra.com, Jabong.com and Amazon.in have all seen some of their sales in recent months fall short of internal targets, according to six people familiar with the matter who spoke on condition of anonymity.

Myntra ran a three-day sale at the beginning of this month and hit only 50% of its target, two of the six said. They added that the company is now running a television commercial ahead of another sale this weekend to better its prospects.

“Some sale events have done reasonably well considering the company didn’t spend a lot of marketing money, but overall, it’s been a mixed bag. Consumer response to sales hasn’t been as good as expected since the January sale,” a third person, a Myntra executive, admitted.

Amazon denied that its sales have not been working.

“At Amazon, we have always believed that customers will continue to shop with us as long as they don’t find a better shopping experience elsewhere. Our focus has therefore always been on offering our customers a wide and unique range of products at low prices and provide a fast, reliable and trusted shopping experience. Price, we believe, is just one factor,” said an Amazon India spokesperson.

But most analysts and customers agree that in general, sales on e-commerce marketplaces are no longer as impactful as they once were.

Tanmay Sharma, 26, is an avid online shopper. He has skipped most sale events in last two months. “These sales did not offer steep discounts. A 20-45% discount can be fetched any time by using cashback vouchers and additional discounts on mobile wallets and credit cards,” he explained.

“Companies are seeing no movement in GMV (gross merchandise value, or value of the products sold on the site) if they offer a 30-40% discount,” added Paras Arora, vice-president at TargetingMantra, an e-commerce personalization and targeted marketing platform. “Deep discounting always works as consumers are largely deal chasers but companies need to focus on building loyalty and not customer acquisition alone.”

That’s bad news for companies that need to keep their GMV moving to retain and increase valuations. To do that, they pump money raised from venture capital funds into discounts and marketing activities. Their ultimate goal: to build market share, remain one of the last marketplaces standing and, hopefully, translate this share into profits at the time.

Discounts will work, said Sanjiv Kathuria, co-founder and chief executive at Dotzot, an e-commerce logistics arm of DTDC Courier and Cargo Ltd, but companies have to be intelligent about them.

Other experts and executives in logistics firms are still trying to understand the reasons behind the tepid customer response.

Sumchit Anand, founder and managing director at Acquisory Consulting India Pvt. Ltd, blames it on poor consumer sentiment arising from larger concerns related to the economy.

T.A. Krishnan, co-founder and chief executive of Ecom Express, a logistics firm, claimed February and March have always been slow months for the retail trade.

Interestingly, Flipkart and Snapdeal have stayed away from aggressively promoting their sales. Flipkart is expected to run one large sale event around Diwali just like the BigBillionDay it did in 2014.

Mihir Dalal in Bengaluru contributed to this story.

Flipkart has biggest piece of Indian e-tail pie.

The market share of e-commerce companies has so far been a confidential matter, but a new report by Morgan Stanley suggests a pecking order. While Flipkart, founded by Sachin Bansal and Binny Bansal as an online book retailer in 2007, tops with 44 per cent, younger rival Snapdeal is a close second at 32 per cent. US giant Amazon, which launched in India in 2013, is a distant third, at 15 per cent, according to the report. The remaining nine per cent is with the rest of the companies, whom the report does not name.

The report notes fashion as a segment constitutes 30 per cent of India's e-commerce market. In fact, Flipkart's fashion offering got stronger after it acquired Myntra in a $300-million deal last May. Snapdeal, chasing Flipkart, recently acquired luxury fashion portal Exclusively, indicating the significance of fashion in e-commerce. Snapdeal is expected to close half a dozen more acquisitions this year at an estimated $1 billion.

Before the Myntra deal, most of Flipkart's business came from consumer electronics and other categories. Consumer electronics is still a major play for Flipkart, but Myntra's fashion business has given a boost to India's highest valued e-commerce company's market share.

"For Flipkart, the key differentiator has been Myntra as it was a perfect acquisition target. Myntra is horizontal in the fashion space and a value-driven business,'' said Mohit Bahl of KPMG India. In the case of Snapdeal, the acquisition of Exclusively is just the beginning in that direction, Bahl added.

Fashion has been the highest margin segment for e-commerce companies. According to experts, bigger companies would have to acquire smaller ones in a segment as niche as fashion.

The e-commerce market is expected to be pegged at $100 billion by 2020 from about $3 billion in 2013, with a reach of less than a per cent.

Snapdeal aiming to race past Flipkart by year-end.

E-commerce company Snapdeal is aiming to surpass rival Flipkart's gross merchandise value (GMV) by the end of this year, said a senior in the company. The Delhi-based five-year-old e-tailer is targeting $10 billion (about Rs 62,000 crore) in GMV. Sources said last week the Bengaluru-based seven-year-old Flipkart planned to double GMV to $8 billion by December.

By December, Snapdeal's GMV will jump more than four times from about $2 billion now. "Electronics, one of the largest contributors to Snapdeal's sales, is estimated to become a $5-billion business, followed by fashion at $2 billion. The remaining will come from other categories put together," said the executive.

GMV in e-commerce means total sales value of the merchandise sold through the marketplace in a period. Most e-commerce companies refrain from sharing their revenues, owing to which the GMV run rate is often used to gauge their financial health. Revenues are a small proportion of GMV.

While Flipkart targets to ship a billion units a month and serve 100 million customers by 2018, Snapdeal is focusing more on its 40 million connected users, 70 per cent of which come from tier-II cities. Industry sources said Amazon India's GMV was about $1 billion.

"Focus on tier-II cities, rather than just metros, worked for Snapdeal very well. In tier-II cities, e-commerce is a 'need to have', while for the tier-I and metro cities, it is 'nice to have'," said the executive.

Flipkart, the poster boy of Indian e-commerce, has been on a fund-raising spree in the past year, with its total cash infusion at about $2 billion. In the same period, Kunal Bahl-led Snapdeal has decided to stay conservative, raising about $1 billion, most of which came from Japan's SoftBank ($627 million).

While Flipkart is reportedly going for its next round of funding, Bahl's Snapdeal, the executive claimed, was "comfortably" funded till the time when it would turn cash-positive. "Well, there may be fresh funding if the company decides to go for more strategic partnerships. However, the company is yet to zero in on a timeframe for turning it into operating cash-positive," pointed out the executive.

Snapdeal founders have preferred funding from strategic investors even at lower valuations, rather than from financial investors offering much higher valuations, said the executive.

Indian e-commerce sector is in a hyper-growth mode, mainly because of fast-growing numbers of smartphone users with internet access in the past year. On the other hand, 2014 was a major breakthrough for a handful of e-tailers, with investors infusing fresh cash at higher valuations.

Consulting firm Technopak estimates Indian e-tailing will be worth $32 billion by 2020, more than 10 times its value of $2.3 billion in October last year.

Lloyd says no to e-commerce platform.

While consumer durables companies take to the e-commerce platform for better sales, BSE-listed Lloyd Electric & Engineering is swimming against the tide.

Aiming at an 11 per cent market share, it's making sure its products are not on e-commerce websites, even as Korean competitors Samsung and LG are pushing their products through e-commerce more aggressively.

Lloyd is not in favour of online sales via platforms like Flipkart or Snapdeal because it is affecting dealers' business, it says. The company has a pan-India network of a little over 7,000 dealers, with 300 service centres.

Lloyd aims to sell around 400,000 units of home air conditioners this summer, to corner about 11 per cent share in the domestic AC market. The Indian AC market is limited to 3.75 million in annual sales, a penetration rate of three per cent.

Last year, room AC sales grew 10 per cent in volume terms. The price of power-efficient five-star ACs is one consideration for low adoption.

"We are not chasing market share. Our main focus is on quality and customer delight. E-commerce players are burning cash with heavy discounts. E-commerce players have made major inroads into the country's retailing business by offering unprecedented discounts, which impacted sales of brick-and-mortar retailers, even though they are also making huge losses. We are not allowing them to offer any discount on any Lloyd products. We are in discussion with Flipkart to resolve this issue," said Nipun Singhal, director.

Lloyds has also filed a case against Snapdeal; Singhal said he wouldn't comment on this, as the matter was in court. "We do not want our dealer network to suffer due to online sales," he said.

An email to Snapdeal did not elicit a response.

However, companies that used to discourage consumers from buying online, saying installation and after-sales services would be affected, are changing their stand. "As e-commerce is dominated by the metros and tier-I towns, and is growing at a rapid rate, companies can't afford staying away from it. The festive season is a good time to start afresh," said an executive at a top consumer durables maker.

E-commerce firms up in arms over bilateral pacts to liberalise sector

Homegrown e-commerce firms like Flipkart have strongly opposed what they perceive as the government’s willingness to employ bilateral pacts with some big trading partners to liberalise the sector while the policy stance outside such pacts, or in the most-favoured nation (MFN) space, is to tread warily on this front. Analysts see this as an attempt by these local firms to create a vast business space using their deep pockets to keep potential competition at bay.

Local e-tailers are learnt to have “strongly” opposed Japan’s pitch for the sector’s liberalisation through the mega regional pact called the Regional Comprehensive Economic Partnership (RECP) agreement, official sources said. India is participating in RCEP negotiations with 15 other countries.These players have also objected to something unnoticed so far — India agreeing for a separate e-commerce chapter in the Comprehensive Economic Cooperation Agreement (CECA) with Singapore without adequate stakeholder consultation.

These players have also objected to something unnoticed so far — India agreeing for a separate e-commerce chapter in the Comprehensive Economic Cooperation Agreement (CECA) with Singapore without adequate stakeholder consultation.

Currently, India allows 100 per cent FDI in B2B e-commerce activities (as in wholesale trade), but foreign investment is not allowed in such firms. Domestic e-commerce representatives, in RCEP stakeholder talks with the government last week, said the country should not commit to liberalise the sector through the ‘inventory model’ as it amounts to B2C (retail) e-commerce, in which FDI is prohibited in the country.

The ‘inventory model’, say domestic firms, leads to the creation of monopolies as big global players offer to buy products from sellers (largely MSME players) at an attractive price initially, but squeeze their margins later when these small sellers are entirely reliant on them. The big e-tailers then offer huge discounts to customers through the online portal and pocket profits in the long term. In the inventory model, the same entity has the ownership of goods and services.

However, domestic players say the ‘third-party exchange marketplace model’ adopted by them is more of a B2B model as they just create an online platform to help connect buyers and sellers. Local e-tailers say their revenues come mainly from the fees for providing the online platform, data analytics, generating brand awareness, rent for facilitation centres and commissions on sales. The sellers have full ownership over products and services and have freedom over pricing. Local firms say ‘marketplace model’ players do not directly compete with MSMEs and therefore do not hurt entrepreneurship.

The government, after a stakeholder discussion last week, had said it will hold talks with states on “the manner in which FDI is needed or not needed, and on whether allowing FDI will affect the level-playing field of brick-and-mortar stores”.

Flipkart looks to raise debt with Rs 3,000-crore rupee bonds

 Flipkart, the nation's biggest online retailer valued at more than $16 billion, may raise debt for the first time by selling rupee bonds for as much as Rs 3,000 crore.

The plan is still a draft, said three people familiar with the company's thinking. Bond investors may not be as generous as equity investors to a company that's unlikely to turn a profit in the next few years, some analysts said.

The business model, which involves discounting to gain market share and burning through cash, may lead investors to demand a steep interest rate as high as 16% a year, said those cited above.

"It is at a preliminary stage," said one of those cited above. "Equity investors have an upside when it lists or when the fad keeps boosting its valuations. But there is nothing in that valuation for a bond investor.

So, given the financials, it may only be the wealthy investors who would take a bet, and many institutional investors can't even look at buying, given the credit profile." Given that a pure debt security will make the borrowing cost high, bankers may suggest a convertible bond issue with an equity component, the people cited said.

Flipkart did not respond to an email seeking comment. The Bengaluru-based company raised $1.9 billion last year in three rounds, giving itself firepower as it battles Soft-Bank-backed Snapdeal and USbased Amazon for dominance in an online retail market that will be worth $50 billion by 2020, according to UBS. Online retail in India has been characterised by discounting to win customers amid high cashburn rates and heavy losses.

"Conventional debt financing may be a challenge for a startup venture as they do not have any tangible security or free cash flow to offer," said Nishesh Dalal, partner at KPMG. "They may look at hybrid structured debt with an equity kicker or backend repayment options built in."

Indian online retailers such as Flipkart and Snapdeal must collectively raise $20 billion (Rs 1.27 lakh crore) in the next five years to be able to sustain growth, investment bankGoldman Sachs has estimated.

Although international investors may be willing to lend at a lower rate if the company opts for a dollar bond issue, its financials may not be good enough to secure Reserve Bank of India approval.

"Startups, or people raising funds for the first time, will need approvals from RBI under the Foreign Exchange Management Act," said Ashutosh Khajuriah, head of treasury atFederal BankBSE -1.41 %. "A company raising funds from overseas should have the capacity to repay." RBI said it will allow companies to raise funds from overseas investors by issuing rupee-denominated bonds in April. Some companies, including Indian Railways Finance Corp., plan to use this route to raise money.

Flipkart is planning to raise $550 million or Rs 3,500 crore from private equity investors. Last week, ET had reported that Tiger Global, the largest investor in India's top online marketplace, is leading the round with $100 million.

Aditya Birla's More ropes in Zop Now for online deliveries

Aditya Birla Retail's hypermarket format More has tied up with online grocery retailer Zop Now for the latter to manage home deliveries across 16 More hypermarkets in cities such as Bengaluru, Hyderabad and Kolkata.

“We are starting experimenting in e-commerce in the food and grocery segment and have appointed Zop Now as our technology partner,” Pranab Barua, Business Director, Retail & Apparel, Aditya Birla Group, was quoted as saying.

Zop Now is also currently the e-commerce partner for 15 stores of HyperCity.

“Right now, there is high level of interest for online deliveries from hypermarkets. It is an operationally heavy cost for them and most are struggling to get the business model right. Such tie-ups help generate additional revenues and sales and get profitable faster as we help in customer acquisition and online delivery,”Mukesh Singh, Founder & CEO, Zop Now, said.

Zop Now provides technology and logistics for hypermarkets for their e-commerce operations. “Hypermarkets have limited capabilities in e-commerce and we come in as partners charging 10-15 per cent of the margins. “There are about 250 hypermarkets and we are in talks with some of them,” Singh confirmed.

Sujeet Kumar, head of Flipkart’s largest seller WS Retail, quits

Sujeet Kumar, head of Flipkart’s largest seller and its captive logistics business WS Retail Pvt. Ltd, has quit the organization, according to three people close to the development.

Kumar along with another former Flipkart executive, Tapas Rudrapatna, controls 46% of WS Retail. Until 2013, WS Retail accounted for nearly all of Flipkart’s sales. Flipkart moved to a part-marketplace model in that year and is now accelerating the shift by adding tens of thousands of sellers this year.

Still, WS Retail accounts for more than half of Flipkart’s sales and will continue to play a key role as the online retailer tries to make the transition to a pure marketplace. WS Retail also runs Flipkart’s logistics arm, which employs more than 20,000 people and helps differentiate Flipkart from rivals by delivering products faster than external logistics companies.

Kumar has been running the organization since 2012. Kumar and Rudrapatna are said to be close to the Flipkart co-founders Sachin Bansaland Binny Bansal. He is also a college senior of the Bansals and was president of operations at Flipkart until 2012.

Kumar’s influence and importance was evident in his compensation package. Apart from his pay, he was eligible to earn a bonus of Rs.15 crore for the year ended March if WS Retail’s sales exceeded Rs.2,500 crore, according to documents with the Registrar of Companies (RoC).

WS Retail posted revenue of Rs.3,135 crore on a profit of Rs.67 lakh for the past financial year, documents show.

Kumar, who is also a director on WS Retail’s board, did not respond toMint’s email query.

Mint could not independently verify if he will continue to hold the board position or not.

Apart from providing business benefits for Flipkart, WS Retail helps Flipkart show it’s a marketplace, at least on paper. India bans foreign direct investment (FDI) in direct online retail but allows it in the marketplace business.

WS Retail was owned by Flipkart co-founders Sachin Bansal and Binny Bansal until September 2012. The Bansals and two of their relatives were also board members at WS Retail.

In September 2012, Flipkart was forced to sell a large stake in WS Retail to former OnMobile Global Ltd chief operating officer Rajeev Kuchhal, just weeks before Indian regulatory agencies launched an investigation into the company’s business relationship with WS Retail. Both the Bansals and their relatives gave up their board seats, too.

Future Group CEO Kishore Biyani questions logic behind investors' e-commerce funding

Organised retail entrepreneur Kishore Biyani has questioned the rationale behind investors committing billions of dollars to India's e-commerce sector in the recent past. The Future Group chief also expressed concern that online retailers, flush with cash, may eventually look at buying into traditional brick and mortar companies. 

"These days, the media only looks at e-commerce. However, you must also ask if gross margins of any such company are positive or not. There is hope of survival for them when their gross margins are positive. I'm not saying it is sustainable or it is not sustainable. They're getting private equity money in the hope that one day they'll have their own products and brands," Biyani said. 

At present, most e-tailers act as market places, selling other companies' brands and through exclusive tie-ups in certain categories. 

The comments from Biyani, who is credited with making the organised retail sector a force to reckon with over the last 15 years, come within three months of online retailer Flipkart raising $1 billion in a new round of funding at an enterprise valuation of a staggering $7 billion. 

The Flipkart announcement was followed up with American e-tailer Amazon's statement of committing $2 billion as investments in the country.

Brokerages wake up to e-commerce boom

As the Indian e-commerce story begins to play out and the hunt is on to find India's next Alibaba, brokerage houses are quickly doing a mid-course correction and rushing to cover e-commerce stocks such as Just Dial and Info Edge.
Foreign brokerages such as Goldman Sachs, CLSA, Credit Suisse, HSBC, JPMorgan and UBS have all started tracking these stocks, as they sense the potential of the e-commerce space, and its big-bang impact on Dalal Street. 

Sample this: Last July, only three brokerage houses were covering Just Dial, which has jumped to 23 at present, even as the stock has surged nearly three times since its listing in June 2013. Similarly, Info Edge is currently tracked by 24 brokerage houses, against 16 in July last, while the stock has jumped 120% in one year, according to Bloomberg data. 

"The e-commerce space is the next big emerging theme in the markets, and brokerage houses don't want to miss the bus. We expect many success stories to unfold in the listed space, and currently we are at the beginning of an e-commerce boom," Kunj Bansal, ED and chief investment officer at Centrum Wealth Management, said. 

Analysts believe that in the e-commerce space, there are multiple enablers for explosive growth, including a rapidly growing number of internet users, steady rise in the proportion of online shoppers within the internet community, growth in the per-shopper transaction value, and continuous flow of capital investments, making these firms attractive bets. 

"The money which has been raised by Flipkart and Snapdeal has grabbed everybody's attention. The trend of online shopping by Indian retailers hold great promise in the e-commerce space," said Dipen Shah, head, private client group research, Kotak Securities. 

Online shopping in India of physical goods is estimated to reach around $4 billion in 2014, and will multiply by over 11 times to hit $45 billion by 2020, according to MOSL report. "We have initiated coverage on Info Edge with a buy rating and Rs 1,100, as we see the comprice target of company in direct and high-quality play on the exploding e-commerce opportunity," said Rajat Rajgarhia, managing director, institutional equities at Motilal Oswal Securities. 

One of the reasons why brokerages are gung-ho is India's growing internet population, which is estimated to grow to 400 million by 2016, making it the second largest in the world. 

"On Just Dial, we have a buy recommendation with a target price of Rs 1,800, as the company is the leader in local search engines with a strong e-commerce presence, which is a winning formula," Rajgarhia added.