E-commerce to keep deal street buzzing going forward

E-commerce dominated over 75% of total investments in the technology space in FY15 and those numbers are likely to grow bigger in the current financial year. However, India needs to watch for competition from other countries that offer an easier business environment.E-commerce companies have stolen the limelight from traditional IT companies when it comes to attracting investor interest. Private equity and venture capital funds have been cherry picking e-commerce companies to park their capital in the hope of earning handsome returns. Experts say long-term growth potential, scalable biz models and high return on capital, is making e-commerce a very attractive investment bet. According to Harish HV, Parnter, Grant Thornton India, in terms of investment it took 75 of whatever was invested in 2014. Before that it was 41 percent and then it was 30 percent. So from 30 percent it moved to 75 percent and clearly it is hogging all the money that is growing in this sector. Behind that we see some investment in software development, IT solutions etc., but e-commerce is where everybody is putting their money.The e-commerce space saw 280 deals worth over USD 5.3 billion in FY15, over 50 deals worth a billion dollars were closed in the March quarter alone. For instance,Rocket Internet AG and other investors invested USD 110 million in online food ordering platform- Foodpanda, then one of the world's largest hedge funds, Tiger Global and VC player Helion Venture Partners along with Nexus Ventures invested USD 100 million in Shopclues and India Value Fund Advisors pumped in USD 50 million in taxi aggregator-Meru Cabs.According to Grant Thornton, more money is set to pour in. However the e-commerce ride may not be entirely smooth and that's because countries like Singapore are likely to give India serious competition as they offer a more business friendly start-up climate, therefore investors may start encouraging companies to shift operations out of India. “Typically they would encourage these companies by saying you come and incorporate in Singapore and we will give you all the money you need. Singapore is also actively transferring the IP that these companies are creating to Singapore. I am calling it the IP drain. Today we are seeing a lot of IP drain because it is a lot easier to do business in Singapore, investors are comfortable, you can list comfortably, lesser regulations there for operations there,” said Harish HVDespite the hurdles, deal watchers are confident that e-commerce will keep them busy with private equity deals and M&A action through the coming year