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Reality check shows mirror to e-commerce sector
21
Apr '16
More than three months after he predicted a shake-out in the online marketplace sector, tech investor T V Mohandas Pai has said India's e-commerce segment has entered a reality check phase with players focussing on cost cutting and business viability as investors seek performance.

The former CFO of Infosys said in Hyderabad on Wednesday that the e-commerce sector's exuberance of 2015 is now a thing of the past as funding gets difficult.

"Now, the funds have become very costlier. Now, they (investors) are demanding performance. Capital is also becoming scarce driven by interest rates in the US and potential meltdown in demand in China. Europe is not growing and Japan is not doing well and there is fear. That's why venture capital flows have come down. They (investors) have become very selective. People are now beginning to ask questions as to when e-commerce business will be viable and when they will create a sustainable business and value for the money they have put in. That's good news," he said.

Pai has been a critic of e-commerce players who believe that if they go on giving hefty discounts and sell more, they would get more revenues and higher valuation. "That model is not sustainable," said Pai, co-founder of Aarin Capital.

Pai said e-commerce players should build business based upon efficiency and not upon steep discounting. “Discounting can be there to the extent of savings they have compared to a conventional store. They are getting cautious and they are cutting costs, and that's good news," he said.

Despite the astronomical valuations of e-commerce companies, Pai said it is difficult to determine if they are overvalued. (SH)

Fibre2Fashion News Desk – India

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