Valuations invite mainstream Indian companies to foray into D2C

Indian conventional consumer goods companies are increasingly exploring the direct-to-consumer (D2C) approach as it is seen as a US$100 billion opportunity in Asia’s third-largest economy, experts said on Wednesday. .

Tata Consumer’s Nutrikorner, ITC’s and Hindustan Unilever’s The U Shop are some of the 600 Indian companies to have forayed into D2C after Nykaa’s stock market success.

Deliberating on the first day of the two-day India D2C Summit 2022, experts estimated that new age companies are now attracting higher valuation compared to conventional FMCG companies with a 10% revenue shift to D2C by 2025.

“D2C brands enjoyed a price multiple of 15 to 48 times their respective revenue, while conventional FMCG companies like ITC, Bajaj Consumer, Britannia enjoyed a multiple of 3 to 7 times,” said Ankur Bisen, senior partner and head of retail and consumer. , Technopak Advisors.

The D2C pie in the consumer market comprising food, non-food, appliances and furnishings, electronics among others is expected to reach $22 billion in 2025 from $1.9 billion in 2021 , Bisen said.

The consumer market industry size was estimated to be USD 147.5 billion in 2021 and is projected to reach USD 208 billion in 2025.

So far, only 5% of the 600 companies in the D2C segment have reached Rs. 100 crore in revenue, while 20% and 75% have revenue between Rs. 20-90 crore and less than Rs. 20 crore, respectively, which could see consolidation moving forward.

The push to D2C has come over the past two years during the pandemic as more Indians have been seen online than ever before.

“700 million Indians have internet access today, but less than 100 million have ever made purchases online,” said Atul Mehta, chief operating officer of Shiprocket, aided by the payment solutions ecosystem .

The biggest push for D2C is seen by cross-border trade as India’s exports in the just-ended financial year hit the US$400 billion milestone and the US$650 billion target. US dollars fixed for the current fiscal year.

India is among the top 10 countries in cross-border e-commerce and its share is expected to increase from 15% in 2016 to 20% in 2022, said Pavan Ponnappa, eBay India CBT category, acquisition and marketing manager.

The US, UK, Germany, Australia and Japan are the largest market for cross-border transactions in the D2C segment, jewelry, watches, health, beauty, apparel, footwear and accessories making up a significant portion of the segment, he said.