Alibaba's stellar listing a boost to Indian ecommerce cos?

Alibaba, China's biggest e-commerce company, debuted on NYSE on September 19 with largest-ever IPO at USD 25 billion. The company was listed at nearly 40 percent premium to its issue price after which, underwriters exercised a green shoe option to sell an additional 48 million American depositary shares, making Alibaba's IPO the biggest in history taking the value of the deal to USD 25 billion.

Although Alibaba has taken 15 years to reach its current position, it has had consistent nimbleness in its operations. However, Karan Marwah, Partner - Capital Markets Advisory, KPMG says Alibaba operates an online business-to-business (B2B) marketplace together unlike Amazon or Flipkart that sell products to end consumers directly.

In terms of servicing the e-commerce sector, the bottleneck for the e-commerce has been the infrastructure and key challenges such as logistics or even the ease of getting payments from customers like cash on delivery being unique trend in India, he says in an interview with CNBC-TV18's Senthil Chengalvarayan and Sonia Shenoy.

Interestingly, few of large e-commerce companies have the scale and ambition but there are smaller ones doing reasonably well and are looking at niche markets, he adds.

Joining the bullish stance on Indian e-commerce business, Rohit Bansal, chief executive officer, Snapdeal.com says, "There is no reason to believe that in 10-20 years e-commerce in India will be anything less than 10 percent of retail. By that time, retail in itself will be a trillion dollar market. So there is absolutely a 100 percent possibility of creating a USD 100 billion e-commerce company out of India."

Below is the edited transcript of the interview:

Q: Do you concur with Snapdeal's Rohit Bansal's view that this could be USD 100 billion business in the next 10-20 years in India itself?

A: Quite clearly, we are at a stage where we have a bunch of all these companies that have grown to a scale and have the ambition to clearly grow to those levels. Even from a market perspective, one needs to keep in mind the fact that where we are vis-à-vis China where Alibaba has grown out. If you look at things like internet penetration, the extent to which the infrastructure has been developed in China vis-à-vis India, we are at a stage where we can and will grow to a level, which should be pretty comparable to where China is today. Obviously, the relative age of the business and the sector in India vis-à-vis the time at that it has had to grow in China.

Q: 10 percent of retail in the next 10-20 years. I know that is a broad range timeframe but do you think you can get to 10 percent of the retail business?

A: I don't have a crystal ball to say whether it is going to be 10 percent or not but clearly the indicators are all poised to that kind of growth provided we can get infrastructure right, there is clearly no reason why we cannot get there.

The bottleneck in my mind has been that the infrastructure and the key challenges e-commerce has faced is logistics or even the ease of getting payments from customers like cash on delivery being unique trend here.

Q: What are the opportunities to investors here at the moment? Obviously they cannot invest in e-commerce companies on their own but what are the ancillary businesses that you see growing in tandem?

A: Clearly, logistics is in my mind a huge space and if someone can get that story right in terms of servicing the e-commerce sector, keeping in mind our infrastructural bottlenecks; that is a big space to watch out for in my mind.

Q: Both Flipkart and Snapdeal have announced their ambitions to become the next Alibaba in India but Alibaba is a conglomerate. They have an equivalent of eBay, PayPal and that is what runs their business but if you just look at Flipkart, it has shut down its payment gateway business last month or so. Do you think that any of these companies have it in them to become next Alibaba?

A: I cannot say whether they are going to be the next Alibaba but the way they have grown in the last few years that they have been around -- again I go back to the point I made earlier, one has to keep in mind the relative age of some of these companies vis-à-vis Alibaba for example. It has taken Alibaba 15 years to get to the scale at which it operates and one of the amazing things about Alibaba has been the nimbleness in its operating models, it has grown, it has changed, it has listened to feedbacks, it has looked at what is working, what not working and adapted itself. You see that happening in India too. Let us say, a company had shut down its logistics or the payment gateway, the point is you have to be receptive to what is happening in the market and as long as you can adapt, you continue to grow.

Q: How long it will take for some of the Indian companies to grow because not just do they have their own company specific hurdles to cross, even India as an economy - if you look at mobile broadband penetration for example, it is much less than even some of our neighbours like Nepal and Bhutan leave alone some of the developed countries. So how long do you think it would take for us to get there?

A: One hopes that with the new government's push on infrastructure, things do look up in all aspects whether it is internet penetration or the state of our highways or new warehousing. All of these are components to the growth of retail and more specifically e-commerce too. But again as far as individual companies go, the interesting thing is that a few of these large companies which clearly have the scale and ambition one also needs to think about the smaller ones that are looking at niche markets and niche spaces which are also doing reasonably well.

Q: How much of a threat is Amazon going to be to all of these players in India?

A: It is huge.

Q: Can you just roll them all over?

A: It has the ambition and the will to do so. The question is the fact that one needs to keep in mind the regulatory aspects here. How quickly can our regulators move to allow Amazon to have full access to the market and is that going to be too late given the incumbent advantage that some of the other big players have here. Those are the things that one needs to keep in mind but clearly they have got the ambition to do exactly what you said.

Q: I am sure you interact with a lot of venture capitalists (VCs) etc. Are you getting any signs of increased interest into the Indian markets in this particular industry especially from VCs like Tiger Global etc, which have investments in Alibaba?

A: Quite clearly, one has seen a flurry of activity from the venture capitalist especially for the sector. If you look at the amount of investments that some of these companies have attracted, that is the other aspect in terms of their stage of evolution vis-à-vis an Alibaba let us say. I think some of these companies are reasonably well funded at least for the next few years whether it is in terms of operational needs or inorganic growth. So as far as that goes, I think there is clearly an interest and that interest continues to sort of grow.