Info Edge India, among India’s few listed Internet companies, today announced today that it will be writing off its entire investment, amounting to Rs 29.3 Crore, in e-commerce company 99Labels this quarter. This follows shortly after the company increasing its investment in Zomato and Meritnation, and it appears to now picking its winners, from its investment portfolio. MediaNama spoke with Info Edge Founder and Vice Chairman Sanjeev Bikhchandani about why they wrote off this investment, and his views on the e-commerce environment in India:
MediaNama: Why have you written off the investment in 99Labels?
Bikhchandani: We have taken into account the current e-commerce environment, especially the funding environment, and we have recognized that this asset has been impaired. We have said that we’re going to write off this investment this quarter, and have informed our investors.
MediaNama: Does 99Labels have cash to operate?
Bikhchandani: They are figuring out what to do, but they’re not shutting down.
MediaNama: What happens to your shareholding in 99 Labels?
Bikhchandani: We have no announcements to make on the shareholding. We continue to be shareholders. As and when there is an announcement to be made, we will make it.
MediaNama: How is the e-commerce environment in India?
Bikhchandani: In the last 12 months, the funding environment has suffered and the government announced that FDI in e-commerce is not permitted. 99labels had not raised any FDI, but it does need further funding. 80-90% of the (Venture Capital) money in the market is foreign money.
MediaNama: What about Indian money?
Bikhchandani: e-commerce is very capital intensive, and there simply isn’t enough money to go around. Indian funds are small. e-commerce in India has been funded over a billion dollars, and it needs a couple of billion more for a viable e-commerce sector in this country. That money is not going to come from Indian sources.
MediaNama: Is this the end of ecommerce in India?
Bikhchandani: People are doing workarounds and building marketplaces, single brand retail, manufacturing companies. The truth is that the companies need to focus on being viable instead of trying to be compliant with regulations.
MediaNama: Werent the regulations clear from the beginning?
Bikhchandani: So, this bit about FDI in e-commerce not being allowed has not been clarified until recently.
MediaNama: What’s the way forward according to you?
Bikhchandani: the govenrment should reconsider its policy. We have interacted informally, and the message is that the policy is not being reconsidered. e-commerce is not a political issue. The govt has said it’s not reconsidering its policy, and that’s their position. Very few companies are viable. Many will not make it.
MediaNama: What does this mean for venture capital in India?
Bikhchandani: Venture Capital will continue, and some will lose. The point is that it’s not going to be a one day switch off, it will be a slow change. Things will unfold. It’s not an event, it’s a process.
MediaNama: Would you invest in e-commerce again?
Bikhchandani: We invested in Happily Unmarried, and look at it from a case to case basis.
MediaNama: Then why have you invested in Happily Unmarried, but not invested more in 99 Labels? What about a bridge investment in 99 Labels?
Bikhchandani: Each case is different. Happily Unmarried is single brand, and can raise FDI. By not allowing FDI in multibrand ecommerce, for a company that has raised money from an Indian investor, the risk goes up in raising more money.
99 labels is a good entrepreneur, good team, and we wish them well. This invesmtnet (of Rs 29 .3 crore) includes 2 bridges that we’ve done in the past, and they’ve been running on that.
MediaNama: What are foreign VC’s saying?
Bikhchandani: People were trying to figure out the regulator environment and the risks.