E-commerce driving demand for warehousing space: CBRE

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E-commerce continues to drive demand for logistics and warehousing space in the country and has attracted a lot of interest from developers and private equity players, property consultant CBRE said.

“With the logistics and industrial segment witnessing significant development, there is a lot of interest from both developers and private equity investment,” CBRE South Asia Managing Director, Advisory and Transaction Services, Ram Chandnani said in a statement.

The government’s investor-friendly investment policies, improving domestic economy and progressive legislative reforms are all steps boosting the sector, he said at a conference here.

“India is yet to achieve its full potential when it comes to the logistics sector, even though the World Bank has ranked India 35th in logistics.

“China is ranked 27th but India is not too far behind,” said M T Murthy, Member (Operations) – India Post, Ministry of Communication and Information.

Stating that lack of adequate infrastructure has slowed down India’s economy in the past, Murthy said the government is committed towards capacity building.

E-commerce is playing a major role in driving up the demand in logistics that witnessed a growth of 57 per cent between 2009 and 2015, the statement said.

“India Post now has 700 e-commerce partners who rely on the government for their service delivery,” Murthy said.

According to CBRE, nearly 2 million sq ft of warehousing space was taken up by e-commerce firms in 2015, which is a significant jump, as the share of the sector rose from a meagre 2 per cent of the total warehousing demand in 2012, to around 22 per cent during 2015.

Cisco steps up India investments

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Global networking major Cisco, which has set aside a corpus of $280 million for funding early stage start-ups in India, has invested in Kolkata-based Videonetics Technology Pvt Ltd, a video surveillance firm that designs, develops and provides ultra-modern surveillance products integrated with video analytics software.

While the amount invested remains undisclosed, Cisco typically acquires an 18-20 per cent stake in every start-up that it invests in. In an earlier interaction with BusinessLine, Joydeep Bose, Managing Director of Cisco Investments – Asia Pacific Japan (APJ), had said the company typically makes investments ranging from $800,000 to $15 million in a start-up.

Confirming the investment in Videonetics, Alok Bardiya, Country Head (Investments and M&A), Cisco Systems India , told BusinessLine that a second investment has also been closed in a start-up that works on IoT (Internet of Things) solutions for Smart Cities, an area that Cisco is heavily focused on to grow its India revenues.

Revenue milestone

Last year, the company crossed the $1-billion milestone in India revenue and is aiming to achieve $2 billion by FY 2018.

Without disclosing the name of the start-up, Bardiya said: “There are two more investments in the pipeline that we should close soon.” This takes Cisco’s investments in Indian start-ups to a total of six over the last 18 months, and with two more in the pipeline, it will take the total tally of investments to eight by the end of the year.

The $49-billion networking giant has already invested in four Indian start-ups over the last two years, namely, Covacsis, Mobstac, Ineda and MobiKwik.

The company’s innovation strategy in India revolves around four pillars – Invest; Acquire; Co-create with start-ups; Co-develop with partners.

While Cisco made its first India acquisition of Bengaluru-headquartered IT security firm Pawaa for an undisclosed amount last October, it has invested in a total of 25 Indian start-ups, some of which are registered abroad, over the last 10 years.

The company’s first attempt at co-creating with start-ups took wings on Thursday, with the announcement of Cisco LaunchPad, an accelerator programme to co-innovate with early to growth stage start-ups.

Partnerships have been forged with companies like Tech Mahindra, Saankhya Labs and industry body Nasscom to co-develop solutions for Utilities, Internet users and Farmers.

Asked if Cisco had identified any start-up to acquire after Pawaa, Bardiya said: “We continue to look for start-ups that are building disruptive solutions that align with Cisco’s business interests.”

Source: https://www.google.co.in/search?q=Cisco+steps+up+India+investments&client=firefox-b&source=lnms&tbm=isch&sa=X&ved=0ahUKEwjrz66q-dTNAhXDro8KHemgArIQ_AUICigD&biw=1280&bih=676

Amazon India sees 250% annual growth in sellers

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US-based Amazon on Friday said it had witnessed a 250 per cent year-on-year growth in bringing new sellers on board, as it looks to tap into the booming e-commerce market in India.

The company, which is making multi-billion dollar investments in India, has about 85,000 sellers on board.

“We started with 100 sellers three years ago and now we have about 85,000 sellers growing at 250 per cent year-on-year and adding nearly 90,000 products a day,” an Amazon India spokesperson stated.

Amazon, which competes with the likes of Flipkart and Snapdeal, has cut its commissions by 25-30 per cent across categories such as mobile phones, PCs, electronic devices and personal care appliances.

“We think these revised rates can significantly help sellers to perform even better and succeed in their business. In addition, we continue to innovate and offer best in class services such as Fulfilment by Amazon, Easy Ship, Seller Flex, etc, to help them with fulfilment/logistics, so that they can focus on their business,” the Amazon spokesperson said.

Flipkart, on the contrary, had recently increased its commissions across key segments and asked sellers to bear the costs of logistics in case of returns.

Recently, Amazon Chief Executive Officer Jeff Bezos had said the company will invest $3 billion in India. This is in addition to the American e-commerce giant’s $2-billion infusion in 2014, taking its total investments here to over $5 billion.

The funds will be channelled towards enhancing customer and seller experience, Amazon India managing director Amit Agarwal had told PTI.

“India is a key market for Amazon and we will work towards continuing to reduce operating costs for sellers backed by good logistics and fulfilment capabilities,” he had added.

 

Source: http://www.business-standard.com/article/companies/amazon-india-sees-250-annual-growth-in-sellers-116061700852_1.html

India ranks second on GRD index on ease of doing business : study

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India has jumped 13 positions from last year to rank second among 30 developing countries this year on ease of doing business, according to a study topped by China.

According to 2016 Global Retail Development Index (GRDI), which ranks top 30 developing countries for retail investment worldwide, a pick-up in GDP growth and better clarity regarding FDI regulations have helped India achieve a second ranking.

Debashish Mukherjee, a partner with A T Kearney and co-head of the Consumer Industries & Retail Products Practice for India and Southeast Asia, said,

India’s strong ranking reflects foreigner retailers increased optimism in its retail market and its vast growth potential. India has relaxed several key Foreign Direct Investment (FDI) regulations in single-brand retail and this has paved the way for multinational firms to enter the market, Mukherjee said.

India’s retail sector has expanded at a compound annual growth rate of 8.8 percent between 2013 and 2015, with annual sales crossing the $1 trillion mark, according to A T Kearney, a London-based business consultancy.
India has also become the world’s fastest growing economy. That, coupled with a large population base and the easing of FDI regulations in the sector, has made it an even more attractive market, it said in the ranking.

We expect to see e-commerce to propel India’s growth and make it a more attractive proposition. However, there are some challenges as well. India remains a challenging and complex market for foreign retailers, where understanding dynamics at the state level is important. Infrastructure bottlenecks including labour laws, complex regulations, high labour attrition rates, and limited high-quality retail space remain areas of concerns for retailers, Mukherjee said.

The country’s retail sector has also benefited from the rapid growth in e-commerce. India is the world’s second largest Internet market and the increasing Internet and smartphone penetration is contributing to the expansion of e-commerce.

As Indian consumers become more comfortable with shopping online, venture capital and private equity firms have boosted investment in the sector, providing further momentum, the report said.

Source: http://yourstory.com/2016/06/india-ranks-2nd-on-ease-of-doing-business/

Government issues licence guidelines for virtual telecom operators

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The entry of VNOs is expected to push down cost of providing telecom services for companies and even give them room for cutting down tariffs.

The Telecom Department on Friday released licence guidelines for virtual network operators, opening the door for new class of players which will act like retailers for telecom service providers.

 

“After considering the recommendations of Trai on VNO, the government has decided to grant Unified Licence VNO (UL VNO),” DoT said in the licence guidelines.

 

The Virtual Network Operators will be entities providing telecom services like mobile landline and internet but only as retailer for full-fledged telecom operators such as BSNL, MTNL and Airtel etc.

 

The entry of VNOs is expected to push down cost of providing telecom services for companies and even give them room for cutting down tariffs.

 

“VNO shall use underutilized telecom infrastructure of national telecom operators. This will reduced cost of ownership on telecom companies to provide telecom services at more affordable rates,” internet firm Bluetown’s Country Managing Director Satya N Gupta said.

 

For obtaining UL VNO, interested companies will need to pay a one-time non-refundable entry fee for authorisation of each service they want to provide and for each service area where they wish to operate.

 

“The total amount of entry fee shall be subject to a maximum of Rs 7.5 crore,” the guidelines said.

Intangible MNC assets may be taxed in case of a global merger and acquisition

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A recent clarification by the government has created a stir among some multinationals which are concerned that their Indian entities might be taxed even in case of a global merger and acquisition with another global company.

More so, the worry is in case of multinationals that hold intangible assets in India, either through research and development centres, or are engaged in businesses where it is tough to value assets.

This is mainly because tax component, if at all, would be decided on valuation of the Indian entity, and whether valuation (Indian entity) accounts for more than half the holding entity outside India. This comes in the wake of the Central Board of Direct Taxes (CBDT) announcing rules for determining fair market value in case of indirect transfer of shares of an Indian entity. Rules specify a method for determination of “fair market value” of foreign target company shares and Indian company shares. In case of an indirect transfer of shares or transaction, if the value of Indian assets is more than 50% of the foreign target company, this could lead to taxation in India.

So if an US-headquartered company invests in India through a Mauritius company and at any point in time there’s a change in ownership, the tax could be applied. The tax would be triggered in India if the ownership of the Mauritius company is changed, and if more than 50% of the total assets of this company (Mauritius company) are in India.

“If a multinational has a presence in India through an intermediate holding vehicle in a third country, and if there is an M&A deal at the intermediate holding entity level, the Indian entity can attract taxation in India,” said Amit Singhania, Partner at Shardul Amarchand Mangaldas.

“While the 50% rule applies, valuing the Indian assets, particularly the right of management or control in an unlisted Indian company would be challenging,”  Singhania said.

Many multinationals are now rushing to their Indian tax consultants to find out which transactions could attract tax here. “Many multinationals that have a presence in India through Mauritius could face some tax in India even if there is an offshore M&A deal, especially where the seller is based in a country whose treaty does not exempt capital gains tax in India,” said Rajesh H Gandhi, partner, tax, Deloitte Haskins and Sells.

“However, more importantly, it could be challenging to identify and value some of the assets and determine the place where they are situated. This would be more relevant for assets like human resources, contractual rights and intangibles such as mobile applications, results of R&D or patents developed in India but registered elsewhere,” said Gandhi.

Industry trackers say that in case of an M&A at an international level, the shares of holding companies are transferred or merged, which is where the problem lies. Many experts also point out that information and documentation required to ascertain the valuation of Indian as well as an intermediary is not just complicated but tough to come by in many cases.

“If so, income tax would assume the Indian entity’s valuation is more than 50% of the holding entity,” said a consultant currently advising such a client. Experts point out that patents held by the Indian company, and some other assets too have to be valued. Not only valuing these intangible assets could have different views, in some cases, these patents or other intangible assets are developed in India but sit on the balance sheet of other group companies outside India.

Source: http://economictimes.indiatimes.com/articleshow/52474147.cms

Amazon sets the pace for e-commerce in India

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Seattle-based e-commerce giant Amazon should be happy that even before it turns three in India on June 5, the company has emerged a leader in this market. Before rivals can protest, we are not talking numbers yet. The American player has won the first round simply because it has successfully pushed competition to change the narrative and metrics of the online play.

Earlier this week, the almost nine-year-old poster boy of Indian ecommerce, Flipkart, announced in three separate interviews that customer satisfaction would be its mantra from now on. GMV or gross merchandise value of goods sold on the platform, till now the benchmark for success, will be kept aside, said Binny Bansal, who became CEO of Flipkart in January. Not too long ago, Snapdeal CEO Kunal Bahl had the same to say about shedding the GMV goalpost.

In the process, both Flipkart and Snapdeal have endorsed what the American e-commerce major has always maintained and indirectly acknowledged Amazon’s heavyweight presence in this market.

Here’s how the customer has always been the central point for Amazon. When asked about the next round of investment coming into India and whether the figure would be higher than the $2 billion announced in 2014, the company’s India head, Amit Agarwal, had said in December 2015: “All I can say is that we will not be held back for investments…. We don’t manage to a number but to the customer’s expectation.” Also, GMV was never a benchmark that this company referred to, unlike its rivals.

The focus on customer flows from the top. In September 2014, Amazon founder Jeff Bezos had told this newspaper, ”I stay heads down, focused. I encourage these guys (the India team) to not pay attention to a bunch of noise, and rather stay focused on the customer experience, figure out how to get products to customers faster with more reliability, earn trust with customers. The rest will take care of itself.”

In fact, the Bansals of Flipkart have known the napkin sketch of flywheel (with customer at the centre) drawn by Bezos some 17 years ago only too well: the two IITians had worked at Amazon in the US before starting their own venture in 2007.

As for numbers, estimates show that Amazon’s growth in India was 250 per cent in 2015 compared to the previous year. This year, the growth has been around 150 per cent. The number of active sellers on the platform is pegged at 85,000 and industry reports have shown that its website is top of the list in e-commerce. The company does not offer separate customer data for different geographies, but it has a total global user base of 300 million plus.

Picking and choosing
Comparisons with Flipkart and Snapdeal are tough. But in a cat and mouse chase, both Amazon and Flipkart or their investors have been dishing out data from time to time, citing analytics firms. In December, two sets of data came out. One was from Bezos in an email to customers. “Just two and a half years from our launch, Amazon.in has become the most visited e-commerce site in India,” Bezos wrote. He cited data analytics firm ComScore to say Amazon was leading with more than 30 million monthly unique visitors as of October 2015. Flipkart was at 27 million while Snapdeal was at 20 million. These numbers reflected unique visitors to e-commerce sites through desktop or laptop, rather than through mobile apps.

In the same month, Naspers, a South African Internet company, said Flipkart, along with Myntra, had over 50 million monthly active users on its smartphone app, three times larger than those on Snapdeal and Amazon during the September 2015 quarter. Naspers owns 17.4 per cent in Flipkart.

If number of visitors is what Amazon and Flipkart cite to claim leadership position, Snapdeal is peddling transaction numbers for the top slot. Snapdeal co-founder and COO Rohit Bansal said in February that the company has 1 million transacting users on the platform (Snapdeal, Freecharge and Shopo combined), and the number is higher than Amazon and Flipkart put together. Snapdeal aims to grow the transacting user number to 20 million by 2020.

There have been shipment comparisons too. Based on interaction with an unnamed logistic firm, a recent media report said that Amazon was the only e-commerce firm to have grown in shipment share from a year ago. While Amazon’s shipment share is said to have grown to 21-24 per cent from 19 per cent earlier, Flipkart’s share dropped from 43 per cent to 37 per cent and Snapdeal’s from 19 per cent to 14-15 per cent. These numbers could not be verified independently.

Number of sellers is another way of comparing the strength of a player. Against Amazon’s active 85,000, Flipkart has more than 100,000 and Snapdeal around 250,000.

The measure of success
Of late, companies have even started measuring the average delivery time as a benchmark in e-commerce. A recent study by PwC put Snapdeal ahead of Amazon and Flipkart in that measure.

Till recently, when the industry referred to GMV as the only solid currency, Flipkart was an undisputed leader at around $10 billion of total sales, followed by Snapdeal at $4 billion and Amazon at $2 billion as of 2015 estimates. One of the analysts that this newspaper spoke to projected the 2017 GMV at $12 billion for Flipkart, $9 billion for Snapdeal and $6.3 billion for Amazon. But according to him, the math could change as it was possible for Amazon to cross Snapdeal’s GMV while moving closer to Flipkart, depending on how the three played out the GMV-versus-profitability game.

A report published by Bank of America-Merrill Lynch in May 2015 placed Flipkart on top with 43 per cent market share, followed by Snapdeal at 30 per cent and Amazon at 18 per cent.

One year later, things have moved on. As reported by this paper, in the next 12 to 18 months, Amazon has the potential to be at the top of the pack, executives at three prominent international analyst firms say. If Flipkart and Snapdeal focus more on getting profits, shifting their attention from GMV, Amazon could race ahead faster, they said.

Stumbling blocks
But there are challenges on the way. The riders that came with the recent guidelines allowing 100 per cent FDI in online marketplace companies are among the hurdles. While liberalising e-commerce, the Department of Industrial Policy & Promotion has introduced conditions to ensure that platform owners do not turn sellers. Thus, sales cannot exceed 25 per cent for any vendor, marketplace players or their group companies cannot sell, guarantee and warranty must be the sole responsibilities of the sellers, and platform owners cannot influence pricing of products so that there’s a level playing field.

In fact, Amazon highlighted the regulatory risks in its India business, citing the latest e-commerce guidelines, in its filings to the US Securities & Exchange Commission.

Apart from the risk of sellers not being able to offer products at low prices on Amazon, as it may be interpreted as ”influencing pricing”, its worry is also Cloudtail, the most prominent vendor on the platform. Cloudtail, a joint venture of Amazon with Catamaran Ventures, promoted by Infosys founder NR Narayana Murthy, must reduce its sale to adhere with the latest Indian policy.

Even so, analysts believe that Amazon stands a better chance than the rest to be a long-term leader in e-commerce in India, primarily because of its war-chest. Amazon is a $100-billion conglomerate and it does have an open cheque book for India.

Source: http://www.business-standard.com/article/companies/amazon-sets-the-pace-for-e-commerce-in-india-116052601474_1.html