BackNaaptol in talks with PE firms to raise $50 mn
Funds to be used to launch 24-hour TV shopping channel, expand e-commerce business, supply chain
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New Delhi: Tele-shopping and e-commerce platform Naaptol.com, owned by Naaptol Online Shopping Pvt. Ltdis in talks with global private equity (PE) investors to raise $50 million (around Rs300 crore) in a third round of funding and will likely close the deal in next three months, founder and chief executive Manu Agarwal said.
Jefferies India Pvt. Ltd is advising the company.
Agarwal said the company plans to launch a 24-hour television shopping channel with the money it raises. He is also looking to use the money to grow Naaptol’s e-commerce business, expand its supply chain, and invest in technology.
E-commerce in India had been estimated to touch $13 billion by end of 2013, according to a 2013 report by the Internet and Mobile Association of India (IAMAI) and audit firm KPMG.
Television shopping is currently a $500 million business, growing over 50% a year, according to Naaptol’s Agarwal. Naaptol began life in 2008 as a price comparison portal but morphed into an online, print and television selling platform in 2009. Today it sells everything from electronics to fashion to home and lifestyle products (the last is its best selling category).
Much of its sales, around 70%, comes from the television platform; Naaptol buys 12-15 minute slots on several general entertainment and regional language channels and uses these to showcase and sell its products. It currently advertises on 25 channels and in nearly 50 publications across nine different languages.
“The multi-channel sector is growing rapidly and if you see worldwide this space is not dominated by any one player," said Agarwal.
Mahendra Swarup, president of industry body, Indian Venture Capital and Private Equity Association (IVCA) said that the space Naaptol is in is growing at around 55-60%, scaling up rapidly, and becoming popular with investors.
“Television shopping is much more of impulse buying unlike the web," Swarup added.
Naaptol gets most of its revenue from customers in Tamil Nadu, Andhra Pradesh, and Maharashtra. Its main competition is television shopping portals such as HomeShop18 and StarCJ.
According to Agarwal, Naaptol reported 165 crore in revenue from commission (commissions charged by the marketplace for vendors to sell goods) at the end of March 2014 and is growing 50% year-on-year. He expects the company to break even by the end of this calendar year.
According to the company, its existing investors New Enterprise Associates(NEA), Silicon Valley Bank(SVB) and Canaan Partnerswill also participate in the next round. Alok Mittal, managing director at Canaan Partners declined comment on the upcoming funding, however, he said that Canaan“we continue to believe in Naaptol and would continue to invest in the company."
SVB could not be reached for comments.
“NEA is a great believer of the Naaptol model and Manu and his team have done a great job in bringing this to current scale. NEA’s endeavour would be to support the company to get the right partner in place. NEA’s participation will depend on the incoming investor’s appetite, many of whom, from what we understand, would like to write the whole cheque themselves," said NEA’s India director Ruchir Lahoty.
In 2011, Naaptol raised $25 million in a second round of funding led by NEA and did a top-up round of $7 million in 2013 from existing investors.
Naaptol’s attempt to raise money comes at a time when shopping channel HomeShop18is looking to go public sometime in May. NW18 HSN Holdings Plc, the holding company for HomeShop18 plans to raise $75 million though an Initial Public Offering (IPO) on New York Stock Exchange (NYSE), according a filing by the company to the US Securities and Exchange Commission.
HomeShop18 chief executive Sundeep Malhotra denied to comment on the IPO and competition. However, he said “the tele-shopping market is doing really well and competition (rivals) raising investments will not change anything."
After a slow 2013, the investment environment seems to be picking up for shopping portals, especially for second and third round investments, said Mittal of Canaan Partners.
While the market for horizontal players is extremely competitive, Naaptol and HomeShop18 are perceived more as tele-shopping businesses than competitors to e-commerce companies such as Flipkart, added Mittal, referring to India’s largest e-commerce firm. “So there will be some money available for them."
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