Amazon India valued at $16 billion

By:Vandita Jadeja 2018-05-22

Amazon’s India business is valued at $16 billion currently and it is expected to reach $70 billion in gross merchandise volume and $11 billion in net sales by the end of 2027. According to a report by Citi Research, India has emerged as the most valuable retail segment which is valued at $44 billion. This development has come after a week after the Flipkart-Walmart deal where Walmart acquired 77% stake for $16 billion in Flipkart.

 

The senior analyst at Citi stated that the e-commerce market will grow at 21% CAGR in the next ten years to $202 billion. This means Amazan can capture about 35% of the market and generate more than $10 billion in revenue and a free cash flow of $1.5 billion by 2027. The valuation is arrived at using a discounted cash flow method and it has not included the growing cloud business in the same.  After Flipkart, Amazon India is the second most valued internet business in the country.

The main India unit, Amazon Seller Services earns revenue through advertisement, shipping fees, commissions and has posted a 41% rise in FY17 and revenue of INR 3,128 crore. Amazon Internet Services, the reseller for the cloud business in the country saw the revenues grow to $406 million and reached INR 2,636 crore during December 2017 from INR 1,993 crore in December 2016. Jeff Bezos, the founder of Amazon has committed $5 billion for India and said the subscription service Prime added more members in India in its first year than in any other country in the past. Prime Video is investing substantially in original Indian content. Amazon already has 42 fulfilment centers, 25 sortation centers and 150 delivery stations in India. Amazon has a market capitalization of $764 billion and is the second most valued company after Apple. Majority of its value is from the dominated position in North America and the AWS business. India is very marginal but Amazon knows that the market will grow in the next ten years.

Flipkart Group includes Myntra and Jabong, it has a combined market share of 39.1% and Amazon India has 31.1% share. Alibaba and Paytm Mall have a market share of 5.6% within a year of operations in the country. In the coming years, the battle between the players will be fought across different categories like grocery as they try to build consumer loyalty. Amazon has already allocated $500 million for the grocery retail business and Alibaba has backed BigBasket, India’s largest online grocery player while Flipkart will turn aggressive in the space with the entry of Walmart.

The competition in the Indian market will only increase and it will be a three horse race. There will not be one company wining the market. Walmart will bring with it the knowledge of retail business and the experience of being present in India for several years.

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