The 180 billion dollar Singapore-based investment fund Temasek is positive on India and is betting big on the e-commerce space. The fund recently invested in e-tailer, Snapdeal and expects the e-commerce market to grow six times in terms of transaction volumes in the next 3-4 years. Temasek was also an early investor in Alibaba and says Snapdeal's model is similar to that of Alibaba.
In a CNBC-TV18 exclusive, Sajeet Manghat caught up with Rohit Sipahimalani, co-head - investment group, Temasek to know more about the company and its expectations going ahead.
Also Read: Amazon ups ante in war with Flipkart, pumps $2bn into arm
Below is the verbatim transcript of the interview:
Q: How much comfortable are you in investing in e-commerce space?
A: We have a lot of experience with investing in different e-commerce models in different markets. We were actually an early investor in Alibaba few years ago and then have subsequently made more investments there.
Q: Will you be offloading some shares when the Alibaba IPO comes?
A: We don't know the time of the IPO but at this point there are no intentions to do that. Similarly, in Brazil we have invested in a company called Netshoes. Alibaba is a market place, Netshoes is more an inventory based sales model. So, they are different business models and different models have different characteristics.
We see a lot of potential for e-commerce in India in terms of growth. We see the market grow six times in the next 3-4 years in terms of the overall transaction volume and so, there is a huge opportunity there.
In terms of how they will play out, you are looking at people who have some scale. At the early stage when there are dozens of players it is very difficult to figure out who the winner would be. The runway is so long that we normally prefer to wait for a while for some of that to play out before we come and invest.
We particularly look at scale, look at technology platform in terms of scalability but you need to see the linkage with the overall eco-system.
Q: What about Flipkart because you had a billion dollar invested into Flipkart yesterday? Did you look at Flipkart? How is the model of Snapdeal different from Flipkart?
A: I won't comment on specific companies that we look at or we don't look at.
Q: I just want to know the difference between the market models?
A: The marketplace model is more where you are not carrying your own inventory but you have a platform under which various buyers and sellers can come together. However, you as a marketplace are facilitating the transactions and making sure there is delivery on time, payment on time and matching buyers and sellers.
An inventory led model is more where you own the inventory yourself and then sell it to customers. To some extent that is the primary difference between the two models.
Q: Which will create more cash flows first – the marketplace model or the inventory based model?
A: It is very difficult to say how individual models will evolve. I can only point one example in China where Alibaba has been the marketplace model and you have another e-commerce player like JD which is more inventory led. From a cash flow perspective the marketplace model has been less capital intensive and has generated more early profits for shareholders.
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