MUMBAI: India’s fledgling e-commerce industry may get a new backer in billionaire Kumar Mangalam Birla.
The $40-billion Aditya Birla Group will soon launch a project to identify opportunities in e-commerce as rising disposable incomes, rapid adoption of smart phones and a large population of young consumers has given rise to enormous potential for online business. Prashant Gupta, who heads the chairman’s office, has been made leader of a new project to prepare the groundwork for the metals to telecom group’s foray into e-commerce.
Gupta was chosen for the project due to his 12-year stint at McKinsey & Co., which helped him gain deep insight into the long-term potential of various businesses, according to two people close to the development.
Ever since joining the group in 2010 as president, this graduate of the Indian Institute of Management, Ahmedabad, has assisted KM Birla in strategic planning and monitoring the diversified businesses.
“His mandate is to study the whole e-commerce space and evaluate the business potential. Based on his finding, the group will decide whether to take the plunge,” said one of the persons cited above.
In 2007, the diversified business conglomerate moved then CFO Sumant Sinha to lead the push into organised retail. Sinha was instrumental in taking over Hyderabad-based supermarket chain Trinethra and building up the retail business.
Aditya Birla Group’s move to get into ecommerce signals the appetite that India’s cash-rich, traditional business groups have for sunrise businesses at a time when local e-commerce ventures such as Flipkart script success stories, forcing global giants such as Amazon to step up their presence in India.
A recent study by McKinsey said India was on the brink of an Internet boom and it is estimated will have between 330 million and 370 million people going online by 2015.
India’s e-commerce market was worth $13 billion in 2013, with online travel booking accounting for more than 70% of consumer transactions. Online sales of retail goods amounted to $1.6 billion in the past year, according to research and advisory firm Forrester, and some industry experts expect this market to explode to $76 billion by 2021.
“Entry of big business conglomerates such as the Aditya Birla Group in this space will lend much more credibility to business being conducted through ecommerce, and therefore, the e-commerce universe is likely to become more encouraging for consumers,”said Ajoy Lodha, partner at Singhi Advisors — a Mumbai-based investment bank.
“So far the majority of the benefits of the exponential growth in valuations of the businesses like Snapdeal, Flipkart and Makemytrip.com has been taken by foreign investors,”he said. “Sometimes it leaves people wondering why Indian investors are not supporting the growth of e-commerce based businesses models.”
After building massive capacity and boosting revenue in traditional commodities businesses, the Aditya Birla Group turned to consumer-facing sectors such as telecom and retail in the late 1990s. The group made a big-bang entry into the retail sector by launching its own brand More in 2008 after entrepreneurs like Kishore Biyani built businesses such as Big Bazaar that changed the shopping habits of urban consumers.
The group spotted an opportunity in solar power in 2009 and turned this into a business proposition in 2011. Essel Mining has recently expanded into coal mining.news-ET