Indian digital companies' growth story gains traction

Frugal innovation, low margins & entrepreneurial spirit driving Indian digital companies; this is setting them apart from the capital-driven model in the West, say experts

e4m by Abhinav Trivedi
Updated: Nov 15, 2013 8:36 AM
Indian digital companies' growth story gains traction

As the digital penetration in the country increases, there is a surge in the digital sentiment. The industry is seeing a huge rise in the number of digital companies – either based in India or founded by Indians. The almost Rs 30,000 crore Indian digital industry has been seeing steady growth over the past few years.

Founders of bus ticket portal sold their stake recently. The company is presently valued 700 crore. Just Dial recently went public with its IPO that closed at 15 per cent gain, making its founder VSS Mani’s wealth close to Rs 1300 crore. Zomato too got huge funding from venture capitalists. The company post the deal is now valued at more than Rs 1000 crore, with a fair share in the international market. Travel portals Make My Trip, Ixigo, etc. are also robustly valued firms.

Most e-commerce portals in India have created value for themselves in the past few years. Recession and slowdown dented the sentiment of the market but most e-commerce portals witnessed a growth in sales this festive season. Jabong, Myntra, Flipkart, etc. registered increased sales, ensuring the average growth rate for the e-commerce players in the dented festive season to be 40 to 45 per cent.

With 230 million digital users in India – the number is only increasing – the ad revenue for overall digital was Rs 2170 crore in 2012. However, experts believe that a bulk of this came from Google and Facebook.

It would be right to say that India digital companies are steadily gaining traction and young entrepreneurs across the country are coming up with new digital portals like never before.

“Small towns and cities have seen a substantial growth in this category. I have known young college graduates coming up with bright ideas. The industry, which was considered naïve once, is now picking up pace. The interesting part is that we see digital space inundated with ideas that may fall in a traditional category. This implies that youngsters are trying to address the traditional voids through virtual ways,” said Nikhil Bajaj, Social Media Analyst.

“Video consumption in India has doubled to 3.7 billion a month over the last two years. India ranks third in the world in watching videos online through a PC and fourth in the world when it comes to watching videos on the phone. This helps overcome one of the biggest barriers to the growth in this category – literacy and language. This has not only aggravated ad spends but has also given a huge surge and boost to many young Indian digital entrepreneurs. Video consumption would be the next big thing Indian digital entrepreneurs would tap,” said Ashok Satrani, Media Analyst.

What is driving the growth?
Experts believe that a big reason for Indian digital companies to excel is the robust market of India because of the consistent demand.

“Most ideas that I receive are bold and innovative. What is surprising is that they are much customised and one does not expect huge returns in the initial years. Small need for a group of people becomes a business idea. This is frugal. Prospective digital entrepreneurs I have met want a lease period of four to five years with no break-even, and want to keep a low margin. This is very different from the capital-driven model in the West. This spirit should differentiate Indian digital companies from their foreign counterparts,” said Mukesh Hirwani, Venture Capitalist from Hyderabad.

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