“The growing scale and maturity of India’s internet economy is starting to create more value and investment opportunities. More than $60 billion has been invested in India’s internet startups in the past five years, with around $12 billion in 2020 alone,” HSBC Global Research said in a report of India’s internet.
It put the total sector value (ex-Fintech) to reach $180 billion by 2025.
“Many of these leaders, which operate businesses ranging from food delivery, e-commerce to online insurance, are now on the cusp of listing,” the report said.
India has 42 Unicorns and over 45 soonicorns, HSBC said.
E-commerce is the largest opportunity, worth an estimated $67 billion by 2025, it said adding this was worth $31 billion 2019 after expanding at an impressive five-year CAGR of 39 per cent.
Amazon and Flipkart control over 80 per cent of the industry today but the contours of the competitive landscape are still evolving.
“For example, Reliance Jio is set to emerge as a significant competitive threat, along with multiple vertical e-commerce players and hundreds of brands that are now delivering direct to consumers,” it said. “We see e-commerce logistics companies such as Delhivery as a lucrative opportunity.”
In India, 48 per cent of retail spending is on grocery, compared to 15 per cent in China and 10 per cent in the US.
Ed-tech is the second-largest opportunity with a market size of $48 billion by 2025. Although still quite fragmented, it is one of the most profitable segments and has one of the largest total addressable markets.
Food delivery is getting back on track, with gross merchandise value almost back to pre-pandemic levels.
“We expect 6 million online food orders a day by 2025. This is well behind China where 40 million orders are delivered every day,” the report said.
The online insurance market remains lucrative, with PolicyBazaar likely to maintain its lead for the foreseeable future.
Meanwhile, ride-sharing faces significant challenges, travel is the most penetrated market and hotels are an untapped opportunity, the report said adding ride sharing has fallen 40 per cent from pre-pandemic levels.
“Mobile penetration, demographics, consumer awareness and convenience are the key drivers of most internet sub-segments. Still, despite strong growth, companies need to continue to invest to ‘incubate’ the market and work on cultural inhibitions,” it said.
For instance, food delivery volumes are 1/20th of China’s, leaving massive scope for growth, but companies will still need to invest in growing the food ordering culture.
“For the gig economy, the regulatory regime has yet to evolve. We see particular risks for ride-sharing, ed-tech and gaming industries. Recent regulations/guidelines for ride-sharing reflect these risks,” the report said.