Demonetisation: December quarter spells bad news for India's internet companies

Malini Bhupta MoneycontrolThe December quarter has not been a good one for India's internet companies. While private funding dried up for unlisted players as investors focused on operating performance, the listed players are expected to be impacted by demonetisation. Private investments in India’s internet companies hit a three year low in the December quarter. During the quarter, internet companies managed to raise less than $300 mn. In calendar year (CY) 2016, internet investments fell by 50 per cent year-on-year to USD 2.7 billion, says Jefferies. In calendar 2015, India’s internet companies had raised USD 5.8 billion from private investors. Investments have hit the lowest June 2013 claim analysts as investors start focusing on profitability. Electronic retailers have clearly fallen out of favour, as sectors such as financial technologies and content companies came into focus. While e-tailing continued to account for the largest share of funds raised in 2016, its total share fell from 74 percent in calendar 2014 to 37 percent in 2016. Arya Sen and Ranjeet Jaiswal of Jefferies said in their report that it was becoming much tougher to raise large rounds above USD 100 million with only seven such transactions taking place in CY16 vs. 15 in CY15 and 8 in CY14. Segments which gained share included online travel, fintech, social networking and classifieds. The main themes for the year 2017 will be profitability and consolidation.Financials of listed Internet companies are also expected to be impacted by demonetisation, believe analysts. Info Edge’s real estate vertical 99acres is expected to see the maximum impact while, Just Dial’s revenues are also expected to take a hit.