Half Of Indian Online Retail Funding Came From Abroad In 2015

At a time when online retailers or etailers have come under the ambit of government scrutiny for possible breach of foreign investment rules, close to half of capital invested into the segment has come in from foreign funds.

Of the total amount of $3,190 million that risk capital investors infused in online retailers in 2015, as much as $1394 million has been funded by foreign funds alone while another $1,600 million has been co-funded by both foreign and India dedicated funds, as per data available with Venture Intelligence. India-dedicated funds alone invested only a meagre $196 million.

This shows increased investor interest in the startup ecosystem from the foreign market. In 2015 alone, as many as 141 online retailers raised capital from investors and expand their operation and cash in on the domestic consumer growth story.

E-commerce companies in the retail space who have raised capital last year include giant such as Flipkart and Snapdeal and Quikr, Oyo Rooms, Pepperfry.com, among others.

The rise in investments in the online retail segment comes at a time when consumers are increasingly embracing the digital wave in their everyday lives and adopting online shopping to harness the true potential of technology.

However, since there is lack of clarity in terms of FDI ecommerce companies, a host of early stage ventures who have raised capital are currently being investigated by the Enforcement Directorate. The probe is under currently under stringent FEMA norms and companies which are under the scrutiny include Flipkart, Snapdeal, Myntra, Jabong, Yepme, among others.

"E-commerce is a new business model that has particularly come up in in the last 5-6 years. The government should have taken adequate steps right in the beginning instead of suddenly waking up now," said ace angel investor and former Infosys Director Mohandas Pai.

"Lack of FDI clarity in this sector is rather hurting the country's brand image at a time investments are pouring in e-commerce," he added.

In a recent press note that was passed in November 2015, the government clarified that etailers who are engaged in manufacturing, are allowed to raise foreign capital without any restriction. However, it did not mention anything about e-commerce overall. As far as brick-and-mortar retail is concerned, the government allows 100 per cent FDI in companies engaged in single brand retail and 51 per cent FDI in multi-brand retail.