Indian e-commerce has seen $ 1.3 billion FDI, says Care Ratings

Indian e-commerce segment has seen $ 1.3 billion foreign investment between January 2010 and June 2013. Also, the number of deals in India in this category was the highest in Asia, said a new study

At present, FDI is allowed in wholesale or B2B e-commerce, while it is prohibited in online retail or B2C. The B2B model refers to marketplace while B2C means inventory led format in e-commerce.

"Restriction on FDI in B2C-Inventory / Independent model has restricted the growth of this segment on account of lack of financial backing required for their expansion plans," said ratings firm Care Ratings.

Equity funding is important for growth of e-retailing given the large requirements on account of deep discounts given to customer as an acquisition strategy, for establishing logistics and creating differentiation in terms of customer service, Care said.

Care believes consolidation in Indian e-tailing space will continue in future given the foray of Amazon, inability to raise follow-up capital from PE by majority start-ups in the past couple of years and likely opening of FDI in B2C.

The e-retailing market in India is estimated at Rs 5,513 crore in FY13 with a robust CAGR of 30.5 between FY08 to FY13. However, e-retailing in India constitutes a miniscule 0.2% of the total retail market and 2.3% of organised retail in India.