Stop! The Internet in India – Exponential Growth Ahead!!

From Shaadi to Shopping, Banking to Travels, Learning to Leasing, The Internet is India’s new mantra—slowly but surely it is gaining commercial scale in areas such as advertising, retail and travel. The Indian Internet story is unique—it is already large (190 mn Internet users), but still has an exponential growth ahead of it in terms of penetration (only 17%) and participation (less than 10% Internet users transact online). Over three-fourths of its users are less than 35 years old and thus keen to embrace this change. The Indian Internet market is driven by (1) High Speed Connectivity (2) Content, (3) Rising Income and (4) Ease of Commerce.

Companies like Google and Facebook have an advertising revenue-based model. We believe others in areas such as online retail, education and multimedia will follow a mix of transaction and subscription based models. Although India has only a few listed companies in this space, unlike China and the US, we believe – Internet businesses have strong growth and cash flows and Internet will gain relevance as commercial businesses scale up.

The nascent Indian online retail market is a bud about to bloom. In it, Flipkart leads quite comfortably, with high user engagement, though peers with a similar reach and global players, such as Amazon and Ebay, have intensified the battle for leadership. Online advertising, which is limited by low Internet penetration, has strong growth potential due to increasing Internet reach and corporate interest in engaging with consumers.