Aditya Birla Groups Chairman Kumar Mangalam plans to enter Indian e-tail segment
Billionaire Kumar Mangalam Birla plans to enter the burgeoning Indian online market. The chairman of the $40 billion Aditya Birla group, which is engaged in businesses from mining and financial services to telecommunications, is open to either acquiring e-retailers or building one from scratch, Birla said in a November 10 interview at his Mumbai corporate headquarters, reports the Times of India.
"There's a lot of ground for new ventures in e-commerce," he told the Times of India. "I am not saying that we can take an Amazon head-on. But there are a lot of green spaces." Surging internet access in the world's fastest growing smartphone market is buoying online shopping and luring investors including Amazon.comInc's Jeffrey Bezos and SoftBank Corp's Masayoshi Son. SoftBank last month announced an investment of $627 million in Indian e-retailer Snapdeal.com, while Amazon said in July that it plans to spend $2 billion in India.
Birla, 47, joins peer Mukesh Ambani, whose Reliance Industries is planning to start "multi-channel shopping in the coming year," according to its annual report published in May. "The potential of e-commerce combined with the network of physical store locations" will offer its customers both choice and convenience, the report said without elaborating.
The group is looking at many business verticals and has "not zeroed-in on any" specific one yet, he was quoted in the Times of India report as saying. Online sales in Asia's third-largest economy will jump sevenfold to $22 billion by 2018, according to estimates by CLSA Asia Pacific Markets.
Any consumer-facing industry is undergoing a lot of technology disruption right now," Ankur Bisen, Senior Vice President for retail and consumer goods at Technopak Advisors, told the Times of India. "Earlier such changes were treated like blips on the radar by these conglomerates. Now, they draw serious attention from these investors. It is a sign of changing times."
Some of the traditional retailers in India are adapting. The sector has the potential to grow 10 times to $30 billion in five years, allowing enough room for newer entrants such as Birla.
For every 100 rupees ($1.6) spent on e-commerce, about 35 rupees is spent on accompanying services, according to a Nov. 5 report by Motilal Oswal Securities Ltd. That benefits companies involved in third-party logistics, warehouses, payments and digital advertising, Motilal said.
The report drew parallels between India and China, where e- commerce has grown at a cumulative annual rate of 76 percent from 2003 to $306 billion.
Birla is looking for investors in his existing bricks-and- mortar retail businesses, which include the "More" chain of supermarkets and Pantaloons apparel stores. Still, he said e- tailing is the way forward.