> ANALYSYS MASON MONTHLY | OCTOBER 2020

ANALYSYS MASON

INTERNET MONTHLY
Consulting specialists in telecoms,
media and digital (internet)
OCTOBER 2020

Featured in this issue

India’s OTT video market and view on valuation of a

leading player

E-commerce logistics in India and view on valuation of a

leading player

Recap: Long-term success factors for peer-to-peer

lending platforms in India

1
Contents

Foreword p 3

India’s OTT video market and view

on valuation of a leading player p 4

E-commerce logistics in India and

view on valuation of a leading player p10

Insight into the key long-term

success factors for peer-to-peer
lending platforms in India p15

About Analysys Mason (including a view

in to our internet transaction advisory
experience) p17

About the authors p19

> ANALYSYS MASON MONTHLY | OCTOBER 2020
FOREWORD
Welcome to the October 2020 edition of Analysys Mason’s
newsletter on the internet and digital markets in India
Dear all,
We are pleased to share with you the October 2020
edition of our internet newsletter. This newsletter
comes during continuingly uncertain times, but
despite COVID-19, investment in the telecoms and
consumer internet / digital sectors in India is
increasing. Consequently, this has also been one of
the busiest periods for Analysys Mason since its
Indian office opened more than 10 years ago.
In this edition of our newsletter, we assess two
relatively well-established sectors that have
significant potential for further growth in India and
have attracted interest from investors from across
the globe: the OTT video market and the
E-commerce logistics market.
India’s OTT video market and view on valuation of
a leading player
The OTT video market in India is expanding, and the
COVID-19 pandemic has accelerated the rate of this
expansion. The size of the market is expected to
grow at a CAGR of 35% to reach USD4.6 billion by
2024. The share of subscription revenue is expected
to increase, driven by a reduction in prices and the
increasing supply of digital-first content and
original content. The OTT video landscape in India
has several players that have different business
models and cater to different user segments. In
this article, we evaluate one such player that
operates on a predominantly advertisement-based
business model. It has amassed a large user base
in a short period of time by carving out a niche for
itself and will be looking to focus on monetization
as the next strategic step. An outside-in analysis
suggests that this player could potentially grow its
revenue by 8-9x and become EBITDA positive over
the next five years. We use EV/revenue and EV/
EBITDA multiples to provide a directional view on
the potential increase in this player’s valuation over
the next five years.
E-commerce logistics in India and view on
valuation of a leading player
In 2019, the size of the e-commerce logistics
market in India was around USD3.1 billion, and we
expect it to reach between USD9.5–10 billion by
2024, driven by an increasing penetration of
e-commerce in the overall logistics market.
Moreover, service providers’ revenue outside of
e-commerce (including end-to-end enterprise
logistics solutions) has increased, as have positive
contribution margins (20–25%), which together
make the e-commerce logistics market an
attractive investment. However, challenges such as
time-to-delivery and utilisation still need to be
resolved to match the efficiencies achieved in
developed markets such as the USA. This article
addresses the question of whether e-commerce
logistics players in India can mitigate these
challenges to achieve scale and technology-based
efficiencies. We also assess how the unit
economics change in such a scenario. Finally, with
EV/EBITDA multiples ranging between 30-35x for
the market in India, we expect the valuation for a
leading player to increase by 30% to 40% by FY21
(versus the valuation in 2019).
I hope that you enjoy reading this month’s edition of
our newsletter just as much our previous editions.
Rohan Dhamija
Partner, Head – India (South Asia), & Middle East
3
> ANALYSYS MASON MONTHLY | OCTOBER 2020

India’s OTT video market and view on valuation of a

leading player

The OTT video market in India is expanding, and the COVID-19 pandemic has accelerated the
rate of this expansion. The size of the market is expected to reach USD4.6 billion by 2024 and
the share of subscription revenue is expected to increase. The Indian OTT video landscape
has several players that have different business models and cater to different user segments.
In this article, we evaluate one such player that operates on a predominantly advertising-
based business model. It has amassed a large user base by carving a niche for itself, and its
valuation is expected to grow as it focuses on monetisation.

Driven by these factors, the OTT video market in India is

expected to grow from USD1 billion in 2019 to
approximately USD4.6 billion by 2024, at a compound
annual growth rate of 35% (see Figure 1).

4,600
Advertising
Subscription
Revenue (USD million)

54%
+35%

The OTT video market in India is expanding, and the

COVID-19 pandemic has accelerated the rate of this 1,025
46%
expansion 68%

Historically, India’s OTT video market has lagged those 32%

of other developing markets. However, over the last few 2019 2024
years, the OTT video in India has picked up facilitated by FIGURE 1: OTT VIDEO MARKET BY BUSINESS MODEL, INDIA, 2019
both demand- and supply-side drivers. AND 2024 [SOURCE: ANALYSYS MASON, 2020]

OTT video market revenue is the sum of two major

• Demand-side drivers: increasing mobile broadband
penetration and a fast-developing digital payment
ecosystem.
• Supply-side drivers: steep increase in number of OTT
video players (more than 50 players operate in India
currently) and an increasingly large number of titles
available on these OTT platforms.
The COVID-19 pandemic is also contributing to growth
in the OTT video market. With the nation spending more
time indoors and the closure of cinemas and
multiplexes, the demand for OTT video content is
increasing at an unprecedented pace. Most OTT video
platforms reported a more than 30% increase in
viewership time after the nation went into lockdown.
sources of revenue – advertising and subscription. As of
2019, the size of the OTT advertising market, also
known as advertising-based video on demand (AVoD),
was USD750 million in 2019, contributing to two-thirds
of the total OTT video revenue. Digital advertising has
grown rapidly over the last few years. This trend,
coupled with the imposition of lockdown and the
subsequent reduction in avenues for traditional
advertising, has forced advertisers to increase their
focus on digital platforms. And video advertising is the
fastest growing component of digital advertising.
Currently, video accounts for ~30% of digital advertising
spend and this share is expected to increase to ~40% by
2024. The rising viewership of OTT video platforms has
ensured that OTT platforms get access to a major

4
> ANALYSYS MASON MONTHLY | OCTOBER 2020
proportion of this advertising revenue. The size of the
OTT video advertising market is expected to grow to
USD2.5 billion by 2024 (see Figure 2).
YouTube + Facebook
Telecom
Other OTTs
Revenue (USD million)
+27%
750
63%
0%
37%
2019
FIGURE 2: OTT VIDEO ADVERTISING MARKET, 2019 AND 2024, INDIA
[SOURCE: ANALYSYS MASON, 2020]
Growth in this market will be accompanied by the
following.
• A decline in cost per thousand impressions (CPMs).
Rapidly growing advertising inventory has reduced fill
rates (the proportion of advertisement slots
monetised) and has put downward pressure on
advertising rates. CPMs, particularly for
unsegmented audiences, will continue to decline.
However, the increasing viewership will more than
compensate for this decline. The average time spent
by Indian users on OTT platforms had increased
two-fold over the last 2 years and has increased by
more than 30% over the last few months since the
imposition of the lockdown.
• A reduction in YouTube and Facebook’s share of the
market in favour of other OTT players. Currently,
35.0%
Paid-OTT subscribers as a percentage
of total mobile broadband subscribers
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
-%
-%
FIGURE 3: REGRESSION CURVE OF PAID-OTT SUBSCRIPTION TAKE-UP RATE AND OTT ARPU AS A PERCENTAGE OF
DISPOSABLE INCOME PER CAPITA BASED ON INTERNATIONAL BENCHMARKS [SOURCE: ANALYSYS MASON, 2020]
YouTube and Facebook have the biggest share of the
OTT video advertising market, however, as observed
in developed markets and with the increasing supply
of content by other OTT video players, YouTube’s
2,500 share is expected to reduce over time. (YouTube +
Facebook account for approximately 50% of the OTT
video advertising market in the USA).
45%
• Emergence of telecoms operators as significant
players in the OTT video advertising market.
Telecoms operators have recently started offering
16% OTT video services to their subscriber base. As
operators strengthen their content portfolios and
adoption of these offerings increases, operator-
39% driven OTT platforms will correspondingly generate
increased advertising revenue.
2024 On the other hand, the OTT video subscription market,
also known as subscription-based video on demand
(SVoD), had a revenue of USD325 million in 2019,
contributing to one-third of the total OTT video revenue
(see Figure 3). Willingness to pay for OTT video content
has historically been low in India primarily because of
the relatively high pricing of OTT video subscriptions
(compared to income) and widely available free content.
However, OTT players are beginning to offer OTT video
subscriptions at lower prices and using innovative
pricing strategies. Telecoms operators are offering OTT
video services bundled with their mobile and fixed
broadband plans; Reliance Jio is preparing to offer
premium OTT video services at very affordable prices,
and OTT players have started offering shorter duration
plans and are bundling different types of content to
cater to various user segments. The closure of cinemas
and multiplexes due to the ongoing pandemic, launch
of a significant amount of digital-first content and
investment in original content has further bolstered the
case for growth of SVoD services in the country.
R2 = 0.79
India (2024): >30%
With increasing affordability, take-up of OTT video
subscription in India could be >30% of OTT video user
base by 2024.
For Jio, the OTT subscription take-up rate on its user
base could be much higher due to – significantly lower
prices, aggregated content from multiple providers and
the benefit of its large captive user base
0.5% 1.0% 1.5% 2.0% 2.5%
Paid-OTT ARPU as % of monthly disposable income per capita
5
> ANALYSYS MASON MONTHLY | OCTOBER 2020

The total number of OTT video users in India is expected
to grow to 700 million by 2024, and as affordability of
OTT video subscription increases (due to falling prices),
we expect the take-up rate of OTT video subscriptions
(paid subscriptions as a percentage of total OTT video
users) to increase to more than 30% of the total OTT
video user base (see Figure 3), translating to
approximately 220 million paid OTT video subscriptions
in 2024. Consequently, the size of the OTT video
subscription market is expected to grow to USD2.1
billion by 2024 (see Figure 4).
2,100
• AVoD: advertising-based video on demand.
• SVoD: subscription-based video on demand.
• Freemium: a combination of AVoD and SVoD, wherein
some content is available for free (advertising-based)
and the premium content is accessible to paying
subscribers only (subscription-based).
• Telecoms operator-driven: telecoms operators offer
OTT video content bundled with their own services in
order to make their offerings more attractive, which
boosts revenue.1

In terms of revenue, YouTube accounts for the biggest

Revenue (USD million)

share of the OTT video advertising market, followed by

+45% Hotstar (see Figure 6). And Netflix accounts for the
biggest share of OTT video subscription market,
followed by Prime Video and Hotstar (see Figure 7).

325 9%
3%
1%
2020 2024 5%
0%
FIGURE 4: OTT VIDEO SUBSCRIPTION MARKET, 2019 AND 2024,
INDIA [SOURCE: INDUSTRY DISCUSSIONS, ANALYSYS MASON, 2020]
18%
Apart from AVoD and SVoD, transaction-based video on 63%
demand (TVoD) is beginning to gather some pace in the
Indian OTT video market. Historically, YouTube was the
only major OTT video player to offer TVoD, but other
leading OTT video players such as ZEE5 have also
started trying TVoD. As it has been challenging to make YouTube + Facebook TVF
Indian viewers to pay subscription fees, the low-ticket Hotstar Alt Balaji
based TVoD model could emerge as one more avenue
MX Player Others
for OTT video players to generate revenue.
ZEE5
The Indian OTT video landscape has several players
FIGURE 6: OTT VIDEO ADVERTISING REVENUE BY PLAYER, INDIA,
with different business models and catering to
2019 [SOURCE: INDUSTRY DISCUSSIONS, NEWS REPORTS, COMPANY
different user segments FINANCIALS, ANALYSYS MASON, 2020]

The Indian OTT video landscape has several players

with different business models (see Figure 5). 8%
2%
Business 8%
Key OTT video players
model 38%
AVoD MX Player, TVF, Arre
21%
Freemium YouTube, Hotstar, ZEE5, Sony
LIV, Alt Balaji, Voot, Eros Now

SVoD Netflix, Prime video 23%

Netflix Hotstar Alt Balaji

Telecom Jio, Airtel, VI
operator Prime video ZEE5 Others

FIGURE 5: KEY OTT VIDEO PLAYERS IN INDIA AND THEIR BUSINESS FIGURE 7: OTT VIDEO SUBSCRIPTION REVENUE BY PLAYER, INDIA,
MODELS [SOURCE: INDUSTRY DISCUSSIONS, ANALYSYS MASON, 2020] 2019 [SOURCE: INDUSTRY DISCUSSIONS, NEWS REPORTS, COMPANY
FINANCIALS, ANALYSYS MASON, 2019]

6
> ANALYSYS MASON MONTHLY | OCTOBER 2020

Various OTT video players in India are targeting different
customer segments and have positioned their offerings
accordingly (see Figure 8). Netflix, with its premium
pricing and unmatched library of international content
is focused on the premium segment. At the other end,
MX Player, which offers free content and has a large
collection of Hindi and regional content, is focused on
the mass market.
Advertising revenue
The platform generates all its revenue through
advertising. However, compared to other players in the
market, its advertising revenue per user is towards the
lower end of the spectrum (see Figure 9). In the future,
we expect the platform’s advertising revenue per user
to increase to USD0.4–0.5 by 2024 driven by factors

Netflix Prime video Hotstar ZEE5 MX Player

Premium focused, trying

to enter mid
• Highest pricing; Premium and mid- Generic appeal with a
slightly cheaper segments slight tilt towards
mobile-only plan; no • High pricing (lower premium
Premium

free content than Netflix); limited • Multiple price

• Best international free content options: high,
content, sizeable Hindi • Sizeable library of intermediate and free
original / tentpole international content content
content, some regional and Hindi original / • Sports content (IPL)
content tentpole content, caters to all Mid-segment focused
Mid-segment

some regional categories; Hindi and with some mass content

content regional TV content • Intermediate price,
(from Star India) some free content
caters to mid and • Large library of Hindi
some free content for and regional content
mass segment; from ZEE and a good
sizeable international number of originals
content from Disney Mass focused, trying to
and HBO enter mid
• Completely free
• Large library of
Mass market

Hindi/regional
content & low-cost
original content;
launched slightly
upmarket shows
(Ashram) to appeal to
mid-segment

FIGURE 8: MARKET POSITIONING OF KEY OTT VIDEO PLAYERS IN INDIA [SOURCE: INDUSTRY DISCUSSIONS, COMPANY WEBSITES, ANALYSYS MASON, 2020]

A leading AVoD player has amassed a large user such as an increase in engagement per user (time
base by carving a niche for itself, and its valuation is spent on the platform), higher utilisation of
expected to grow as it focuses on monetisation advertisement inventory and improvement in CPMs
through a higher proportion of direct sales of inventory
In the overcrowded OTT video market in India, one of (rather than through advertising networks). Further, we
the players has carved a niche for itself with exclusive
and regional content and has emerged as one of the 0.7
fastest-growing (in terms of viewership) OTT video
platforms in the country. This AVoD-focused OTT video
platform (hereafter ‘the platform’) has garnered more 0.5
150–200 million MAUs in India, generated 0.4
approximately USD35 million in revenue last year and
claims to have more than doubled its monthly revenue 0.3
post the lockdown. More than 30% of the content on the 0.2
platform is regional and has a sizeable collection of
original and exclusive content. It has created a library of
more than 150 000 hours of video content by gathering
a large variety of relatively low-cost content. The
TVF Hotstar ZEE5 Alt Balaji The
platform also has music in five languages and a
platform
collection of more than 60 hyper-casual games.
FIGURE 9: ADVERTISING REVENUE PER MAU FOR OTT VIDEO
PLAYERS IN INDIA, 2019 [SOURCE: COMPANY WEBSITES, ANALYSYS
MASON, 2020]

7
 > ANALYSYS MASON MONTHLY | OCTOBER 2020

also estimate the platform’s user base to nearly double 15% 15%
to 300–400 million MAUs by 2024. The increase in
revenue per user and the number of users would
increase the platform’s advertising revenue to USD140–
180 million by 2024. This would translate into the
platform’s advertisement market share to increase
from 5% in 2019 to 6–7% in 2024 (see Figure 10).
6%
2,500
YouTube + Facebook
3%
Telecom 2%
45% 1%
The platform
USD million

Others ErosNow Alt ZEE5 Hotstar Sony Voot

Balaji LIV
16%
FIGURE 11: SUBSCRIPTION TAKE-UP RATE FOR INDIAN OTT
750 6%
VIDEO PLAYERS [SOURCE: INDUSTRY DISCUSSIONS, NEWS REPORTS,
COMPANY FINANCIALS, ANALYSYS MASON, 2020]
63%
33%
5% 0%
32% 2,100
Netflix
2019 2024
The platform 24%
FIGURE 10: THE PLATFORM’S SHARE OF THE OTT VIDEO
Telecom 5%
ADVERTISING MARKET IN INDIA, 2019 AND 2024 [SOURCE:
USD million

INDUSTRY DISCUSSIONS, ANALYSYS MASON, 2020] Others

28%

Subscription revenue

With monetisation in mind, the platform is expected to

325 43%
move to a freemium model soon, wherein some of its 38% 0%
content will continue to be available for free but 0%
62%
accessing the premium content will require a 2019 2024
subscription. As it is positioned towards the mass
market, we expect the subscription price to be low – FIGURE 12: THE PLATFORM’S SHARE OF INDIA’S OTT VIDEO
around the price point of USD0.5 per month. As of now, SUBSCRIPTION MARKET, 2019 AND 2024 [SOURCE: INDUSTRY
DISCUSSIONS, ANALYSYS MASON, 2020]
the subscription take-up rate (paid subscriptions as a
percentage of total MAUs) for OTT video players in India
is low at 1% to 15% (see Figure 11). In general, 270 - 320
Advertising
subscription take-up rates in India are expected to
increase for the aforementioned reasons. However, as Subscription
the platform is positioned towards the mass market, its
subscription rate is expected to reach a modest level of 140 - 180
USD million

6–7% and subscription revenue to reach USD110–150

million by 2024. This would translate into the platform’s
subscription market share to increase to 5–6% by 2024
(see Figure 12).

Unit economics 110 - 150

35
The platform’s total revenue is estimated to increase
35
from USD35 million in 2019 to USD270–320 million in
2024 (see Figure 13). As of 2019, its EBITDA margin is 2019 2024
estimated to be –60–70% (see Figure 13), primarily FIGURE 13: THE PLATFORM’S REVENUE, 2019 AND 2024 [SOURCE:
because of the high content cost, high expenditure in INDUSTRY DISCUSSIONS, NEWS REPORTS, ANALYSYS MASON, 2020]

8
> ANALYSYS MASON MONTHLY | OCTOBER 2020

product development/enhancement and high marketing

spend due to its current focus on growing its users at a Illustrative
rapid pace. As the platform reaches a sizeable user
1.7 – 2.4
base over the next 5 years and the product reaches
maturity, economies of scale will help to lower the
content cost and technical cost. Marketing spend will
also moderate as the focus moves away from
subscriber acquisition to monetisation. Consequently,

USD billion
the platform’s EBITDA margin is expected to increase to
8–10% by 2024 (see Figure 14). 0.6 – 1.0
Enterprise value ~0.5

We estimate that the platform’s revenue would more

than double from USD35 million in 2019 to
approximately USD75 million in 2020. Using enterprise
2020 2024
value (EV)/revenue multiple of 6–7x, we estimate the
platform’s EV to be approximately USD0.5 billion in 2020 Based on EV/Revenue Based on EV/EBITDA
(see Figure 15). As the platform’s revenue grows to
USD270–320 million by 2024, a back-of-the-envelope FIGURE 15: THE PLATFORM’S ENTERPRISE VALUE ESTIMATE,
calculation suggests that its EV will grow to anywhere 2020 AND 20242 [SOURCE: ANALYSYS MASON, 2020]

between USD1.7 billion to USD2.4 billion by 2024.

However, given the low EBITDA margin forecast, the
platform’s valuation based on EV/EBITDA multiple
paints a slightly different picture. Based on an EBITDA
of USD25–35 million in 2024 and using an EV/EBITDA
1
Telecoms operators get a number of direct and indirect benefits by offering OTT
content; direct benefits – subscription and advertisement revenue; indirect
benefits – increase in subscriber base, churn reduction and increase in data
usage (and consequently increase in ARPU).

multiple of 25–30x, the platform’s estimated EV comes 2

The enterprise value has been estimated using a multiples approach. Analysys
out to be in the range of USD0.6 billion to USD1.0 Mason has not conducted a detailed analysis of the company’s cashflow to
ascertain the enterprise value
billion.

Item 2019 Remarks 2024

Revenue 100% N/A 100%

Content cost 100% Will decrease with increase in scale 55-60%

Economies of scale in content delivery networks /

Technology cost 20-25% 10-12%
bandwidth; reduced spend on product development

Will decrease as focus moves away from increasing

Marketing cost 25-30% 14-16%
user base rapidly to monetization

G&A cost 15-20% Efficiencies driven by economies of scale 7-9%

EBITDA margin (-)60-70% N/A 8-10%

EBITDA (USD million) 25 - 35

FIGURE 14: THE PLATFORM’S ESTIMATED UNIT ECONOMICS, 2019 AND 2024 [SOURCE: INDUSTRY DISCUSSIONS, ANALYSYS MASON, 2020]

9
> ANALYSYS MASON MONTHLY | OCTOBER 2020

E-commerce logistics in India and view on

valuation of a leading player

Expedited recovery from COVID-19, healthy unit economics, a growing share of

e-commerce in the logistics market and increased diversification to include other
market segments (enterprises) makes e-commerce logistics players an extremely
attractive proposition for investments.

(primarily provided by larger organised players) in India

has fuelled the expansion of organised logistics. The
segment has grown at a similar pace to the
e-commerce market in India, which is expected to grow
at a much faster rate (at a CAGR of 25–30% between
2019 and 2024) than the logistics market (at a CAGR of
10.5% between 2019 and 2024). As of 2019, e-commerce
accounted for an estimated 16% share of the organised
logistics market in India and was valued at around
USD3.1 billion . If revenue growth for the e-commerce-
driven logistics market in India continues to mirror the
expected growth for the country’s overall e-commerce
market, the value of the e-commerce logistics market
in India could reach USD9.5–10.0 billion market by
2024.
The logistics market in India is ripe for disruption by
organised players

The logistics sector in India is an integral part of the

country’s economy, contributing 14–15% to its overall
GDP. The sector, which was valued at around USD190 9.5-10.0
10
Size of E-commerce logistics market

billion in 2019, is expected to continue to grow at a

CAGR of around 10% until 2021. While the market was
impacted during the first two months of the COVID-19 8
+26
pandemic in India (March and April), it has largely CAGR
(USD billion)

recovered, particularly the fast-moving consumer 6

goods (FMCG) and agriculture segments. Road freight
constitutes a large share of the logistics market 4
(estimates suggest a share of 60–65%). Moreover, the 3.1
vast majority (about 90%) of the sector is still
2
unorganised (that is, it is composed of numerous small
players), which makes it an attractive market for
disruption by organised players (larger players). 0
2019 2024
While the share of organised players is still low – at
FIGURE 1: FORECAST OF E-COMMERCE LOGISTICS MARKET SIZE IN
10% – the success of e-commerce-driven logistics INDIA, 2019 AND 2024 [SOURCE: ANALYSYS MASON, 2020]

10
> ANALYSYS MASON MONTHLY | OCTOBER 2020
The e-commerce logistics market can be further
segmented as follows.
• First mile. This is the first leg of the supply chain and
refers to the transportation of goods from the seller
to the logistics player’s warehouse/hub. This
sub-segment accounts for around a 20% share of the
e-commerce logistics market.
• Warehousing. This refers to the racking, sorting,
repackaging and inventory management of the goods
that are being delivered to the customers. It can also
include advanced sorting at the logistics player’s end
(depending on the contract), which includes sorting of
parcels by region and type of travel (for example,
road, rail and air). This sub-segment accounts for
10–20% of the market.
• Last mile. This is the last leg, which includes the
transportation of goods from the hub to the end
customer. The last mile accounts for 60–70% of the
market share.
E-commerce logistics market
~USD3.1 billion
First mile
20%
FIGURE 2: E-COMMERCE LOGISTICS MARKET, SEGMENTED BY SUPPLY CHAIN [SOURCE: ANALYSYS MASON, 2020]
Captive players account for a large share of the
e-commerce logistics market in India
From the supply side, the e-commerce logistics market
in India is split into the following three types of service
providers.
• Captive arms. Logistics arms of large e-commerce
companies. This includes Ekart (Flipkart’s logistics
arm) and Amazon Transportation Services (ATS,
Amazon’s logistics arm).
• E-commerce-focused. This includes service
providers such as Delhivery and Ecom Express.
• Traditional. This group includes logistics service
providers such as BlueDart and Fedex.
The two largest e-commerce players in India, Amazon
and Flipkart, have well-established captive logistics
arms and they service 70–90% of their orders using
their captive arms. This means that the captive arms of
e-commerce companies account for a large share of
the market (50–55%). The market share of
e-commerce-focused service providers has increased
and, conversely, traditional logistics service providers’
share has dwindled as e-commerce players move their
logistics in-house or outsource more to e-commerce-
focused players.
Third-party players in India have been expanding into
market segments beyond e-commerce
While Flipkart and Amazon have primarily used their
captive logistics arms, third-party players have
increasingly focused on expanding into other market
segments that can benefit from their organised supply
chains. While companies such as BlackBuck and Rivigo
have focused on trucking from the outset, other
e-commerce focused players (such as Delhivery) are
now winning more business directly from enterprises.
Warehousing Last mile
10–20% 60–70%
15-20%
10%
50-55%
4-5%
6-7%
8%
eKart + ATS XpressBees
Delhivery Traditional players
Ecom express Other players
FIGURE 3: MARKET SHARE OF E-COMMERCE LOGISTICS PLAYERS AS
OF 2019 [SOURCE: ANALYSYS MASON, 2020]
11
 > ANALYSYS MASON MONTHLY | OCTOBER 2020
E-commerce players are increasingly supplying
integrated end-to-end solutions to enterprises to fulfil
their logistical needs. FMCG firms already have supply
chains in place and have thin margins, so e-commerce-
focused players are targeting enterprises in other
segments (for example, those within the consumer
electronics space). Figure 4 shows the key players in
the industry in terms of the share of e-commerce-
related revenue.
70-80% 70-80%
Share of e-commerce-related
50-60%
revenue
20%
10-15%
BlackBuck Rivigo Delhivery Ecom Xpressbees
Express
FIGURE 4: SHARE OF E-COMMERCE-RELATED REVENUE FOR
LEADING THIRD-PARTY PLAYERS AS OF 2019 [SOURCE: ANALYSYS
MASON, 2020]
A large share (80–90%) of BlackBuck’s revenue is
derived from its full-truck-load (FTL) business, and, as
shown in Figure 4, only a limited percentage of its
revenue is driven by e-commerce. Similarly, a large
share of Rivigo’s revenue (about 80%) comes from
less-than-truck-load (LTL). Delhivery has a healthy mix
of revenue from e-commerce (50–60%) and enterprises
(40–50%). It is, however, important to note that revenue
growth from enterprises is seasonal because of the
reliance on large individual assignments. For both
Ecom Express and Xpressbees, a significant (70–80%)
share of the revenue is derived from e-commerce-
related business.
Efficiencies in scale can drive existing contribution
margins of 20–25% up to 35%
A host of investments have poured into the e-commerce
logistics space in the past few years and a key reason
behind the investor interest lies in the unit economics
of the business. Players in the market have been able to
achieve contribution margins in excess of 20%, driven
by several factors.
12
• Line haul (hub-to-hub transportation) and last mile
(hub-to-customer) account for a majority of the direct
costs (about 80%) involved in logistics, so economy of
scale is the primary driver behind the positive unit
economics, especially for the first movers in the
market. With a greater concentration of end
customers within a certain location, rider efficiency
has significantly improved, which leads to lower
costs.
• Technology-enabled route planning (using machine
learning) has helped to significantly improve the
utilisation of trucks, especially in the return leg
where the utilisation tends to be lower.
The existing (2019) unit economics of the business,
along with the potential for reduction in costs driven by
scale, are as follows.
• Fee per package at a market-level is close to INR80
(USD1.141) per package and will not vary by scale.
• First mile and warehousing together account for
close to INR6–7 (USD0.09) per package. Considering
that the packages are typically shipped in bulk from
sellers to central hubs, there is limited impact of
scale on this item of the value chain.
• Line haul accounts for close to INR20–22 (USD0.24)
per package. Certain local hubs are in remote places
(unlike central hubs), so greater scale can help to
reduce the empty load rate2 in this leg of the supply
chain. Scale-based efficiency of up to 20% is
achievable.
• The existing empty load rate in India stands at 30%,
while in the USA, it is 10%. If India can achieve the
same level of efficiency observed in the USA in terms
of load rate, a cost reduction of 22.4% can be
expected.
• Last mile, which includes two transportation legs
(local-hub-to-delivery-centre and delivery-centre-to-
customer) accounts for close to INR33–35 (USD0.41)
per package. The cost for last mile is roughly a 50–50
split between the two transport legs. With greater
scale, a 15% efficiency is achievable.
• Scale benefits are in line with line haul for the first
leg (local hub to delivery centre).
• The potential scale benefits are slightly lower in the
second leg because riders are typically paid on a per
package basis.
• Driven by the potential for scale-based efficiencies,
the contribution margin can potentially expand to up
to 35% from the existing 20-25% (2019).
> ANALYSYS MASON MONTHLY | OCTOBER 2020

One of the leading e-commerce logistics players in

Cost and margin as share of revenue

India achieved around USD400 million in revenue in

23% FY2020. Its revenue is expected to grow at a CAGR of
35% around 29% to reach between USD510–520 million in
8% FY2021 and USD660 million by FY2022. Assuming an
8% EBITDA margin of 10% in FY2022, the EBITDA will stand
26% at USD66 million.
21%
Taking one-year forward EV/EBITDA multiples between
30x to 35x, the valuation for the player for FY2021 can
43% 36% be estimated to be between USD2.0 and 2.3 billion.4
Moreover, with sufficient scope for margin improvement
(as highlighted earlier), the valuations could increase
Current Potential (post
scale efficiencies) significantly with an increase in scale.

Contribution margin
First mile cost
FIGURE 5: CURRENT (2019) UNIT ECONOMICS COMPARED WITH
POTENTIAL UNIT ECONOMICS (POST-SCALE EFFICIENCIES)
[SOURCE: ANALYSYS MASON, 2020]
The indirect costs are primarily composed of employee
benefit expenses and are typically around 13-15% of
revenue. By increased scale, this figure can be reduced
to around 9–10%. Therefore, the EBITDA margins for
the e-commerce logistics business can potentially
expand from close to 10% to as high as 25%.
Analysis for a leading e-commerce logistics player in
India suggests that this market can support a
valuation of multiple USD billions
One-year forward EV/EBITDA3 multiples for publicly
traded logistics companies in India have varied between
15x to 50x over the past 5 years, with the median being
around 30x.
Line haul cost Challenges within the e-commerce logistics industry
Last mile cost in India must be solved before efficiencies reached in
more-developed markets can be achieved
While the e-commerce logistics market in India has
grown rapidly alongside increasing investor interest and
improved unit economics, there is still a long way to go
before it reaches the efficiencies of the e-commerce
logistics markets in more-developed countries such as
the USA. Below are some of the key challenges within
the e-commerce logistics market in India (and the
logistics market in general).
• Freight timing. With an average delivery time of 3 to 4
days, India lags significantly behind the USA (by 1
day). As customers’ needs for faster logistics
increase, service providers must solve several
challenges, especially in the last mile where delays
are driven by poor pin code mapping and, as a result,
a higher requirement for nearby landmarks.

48.3 49.5
One-year forward EV/EBITDA multiple

46.5
43.8
41.6
35.1 37.7

25.3
23.6 22.3
16.7 16.6
14.8

14.7

FY2014 FY2015 FY2016 FY2017 FY2018 FY2019

Blue Dart Gati TCI XPS

FIGURE 6: ONE-YEAR FORWARD EV/EBITDA MULTIPLES FOR SELECTED PUBLIC LOGISTICS COMPANIES IN INDIA, FY2014–FY2019 (POST-
SCALE EFFICIENCIES) [SOURCE: ANALYSYS MASON AND PUBLICLY AVAILABLE INFORMATION]

13
> ANALYSYS MASON MONTHLY | OCTOBER 2020

• Travel range. A truck in India averages a travel 1

Exchange rate USD1 = INR70.

distance of 300km per day compared with 600km per 2

day in the USA. Service providers in India are in the
process of addressing this challenge by using
multiple drivers (situated in pitstops across the
country).
Share of time spent by a truck with no load.
3
Ratio of the current enterprise value to the company’s projected next 12-month
EBITDA. For example, the one-year forward EV/EBITDA multiple for a company in
FY2020 will be its EV as of FY2020 divided by its projected EBITDA for FY2021.
4
The enterprise value has been estimated using a multiples approach. Analysys
Mason has not conducted a detailed analysis of the company’s cashflow to
ascertain the enterprise value

• Empty load rate. With an empty load rate of 30%,

India lags significantly behind the USA (where the
empty load rate is just 10%). This is because of the
inability to synergise loads, which requires technology
that allows demand to be mapped effectively.

Average freight
3–4 days 1 day
timing

Travel range
300km 600km
(per day)

Empty load rate 30% 10%

FIGURE 7: COMPARISON OF THE PERFORMANCE OF THE LOGISTICS INDUSTRY IN INDIA AND THE USA IN THREE KEY
AREAS [SOURCE: ANALYSYS MASON, 2020]

14
 > ANALYSYS MASON MONTHLY | OCTOBER 2020

Insight into the key long-term success factors for

peer-to-peer lending platforms in India

paperwork is required and credit applicants must have

a good credit history. Online, platform-based P2P
lending has now emerged in India as a solution to this
challenge. It matches borrowers (e.g. individuals and
micro, small and medium-sized enterprises) directly
with lenders (e.g. individual lenders and wealthy
institutions) without the need for financial
intermediaries such as banks and nonbanking finance
companies (NBFCs).

The P2P lending market is still nascent in India

The P2P lending market was worth around USD0.4

Technology has changed how we live our lives, from
getting our daily household supplies to booking a cab,
ordering food from a restaurant or buying a movie
ticket. The financial services sector has been
particularly transformed by technology, and fintech
continues to make considerable changes to the ways in
which money flows and transactions are carried out.
Approximately 20% of India’s population is unserved by
the traditional banking sector. Getting a bank loan
approved is therefore a cumbersome process; the loan
disbursement time is long, a large amount of
P2P lending platform (provides services such as
credit scoring of borrowers, building loan portfolios,
billion in 2019, and only 0.02–0.05% of all loan
disbursals were made through P2P platforms. The
market in India is therefore very nascent compared to
that in other countries (for example, around 3% of
loans are disbursed through P2P platforms in the UK).
However, demand-side factors such as the large
unbanked population and the high numbers of people
with low or no credit history, and supply-side factors
such as the risk averseness of banks and NBFCs and
the lucrative rate of return offered by P2P lending
platforms (as compared to traditional investment
vehicles) will enable significant growth of 60–65% in
the Indian P2P market between 2019 and 2024.
5
P2P market size (USD billion)

cross-selling and collection and repayment services)

4
3-8.5% 1% 60-65%
processing fee investment 3 growth
charged amount charged
2
‘view only’ access to escrow
accounts for monitoring and
reporting purposes 1
Loan funding
for disbursal 0
2019 2024
Escrow accounts FIGURE 2: P2P LENDING MARKET SIZE, INDIA, 2019 AND 2024
maintained with a [SOURCE: ANALYSYS MASON, 2020]
bank operated by
bank promoted
Trust P2P lending platforms are more likely to collaborate
Principal
and interest than to compete with traditional financial institutions
repayments
Borrowers Lenders
(individuals, small (individual investors, A combination of the liquidity crunch in the retail loan
business owners) institutions) segment and the reduction of credit availability in the
traditional NBFC space has resulted in growth in the
FIGURE 1: P2P LENDING MECHANISM [SOURCE: ANALYSYS MASON, 2020]
number of borrowers using P2P lending platforms.
This pool of borrowers mainly consists of individuals

15
> ANALYSYS MASON MONTHLY | OCTOBER 2020

and MSMEs. Traditional banks may not necessarily be
targeting borrowers that require smaller loan amounts
and shorter duration loans or that have no credit
history/low credit ratings. P2P lending platforms are
therefore not expected to compete with traditional
lending institutions. However, in the long term, the P2P
lending market in India is expected to mimic that in
developed economies in terms of the relationship
between P2P players and banks/NBFCs. For example,
in the UK, banks such as British Business Bank have
enabled established P2P players such as Funding
Circle by providing direct funding for small businesses
via P2P platforms, with caveats on borrower eligibility.
automation, analytics and artificial intelligence (AI) to
process loans more quickly and to conduct a
thorough analysis of the credit worthiness of
borrowers. This will enable them to keep default
rates to a minimum.
• Diversify their product portfolio and expand into
other segments. Expanding the product portfolio to
include various loan categories such as personal
loans, educational loans, MSME loans, property
loans and automotive loans can help P2P lenders to
expand their foothold in the market and gain market
share.

Faircent currently dominates the supply side of the
P2P market in India
The P2P lending industry was unregulated until
2017–2018, when RBI started to classify P2P players as
NBFCs. The supply side of the P2P lending market in
India has grown significantly, and 21 players have been
registered with RBI as of July 2020.
• Explore new business models. P2P players could
explore new business models such as setting up a
fund in which lenders could invest capital for a fixed
rate of return. The fund could be operated by the
lending platform, which would diversify the lending
risk across multiple borrowers. This may help
players to attract more risk-averse customers and
gain market share.

Faircent currently has the highest market share
(40–45%) and has raised approximately USD9.32
million so far from marquee investors such as J&M
Financial and prominent domain leaders such as
Muthoot Fincorp and Das Capital. i2iFunding, another
top player in the industry, has received a total of around
USD1.3 million in funding; it raised around USD0.23
million in June 2019 from SucSEED Venture Partners.
The Mumbai-based P2P platform, LenDenClub, raised
USD1 million in a pre-series A funding round in August
2019.
An overview of the main players in the P2P market in
India is given in Figure 3.
There are a few critical success factors for P2P
players
There are three main ways in which that P2P players
can boost their chances of success.
• Use innovative technology tools. P2P lending players
can explore advanced technology solutions such as
Critical success factors
Using innovative technology solutions
Diversification of product portfolio and
expansion into other segments
Exploring new business models
FIGURE 4: CRITICAL SUCCESS FACTORS FOR P2P LENDING
[SOURCE: ANALYSYS MASON, 2020]
In summary, the P2P lending market in India is still
very nascent and the business models are still evolving.
P2P players are focused on gaining market share by
having more borrowers and lenders signed up to their
platform. Players will need to adapt to customers’
demands while managing the risks of the business as
the regulatory environment develops because
customer service is the key to success.

Player Interest rate (p.a.) Loan amount Repayment tenure Registration fee

Faircent 9.99% and above INR10 000–5 lacs 6–36 months INR500
Lendbox 12% and above INR25 000–5 lacs 6–24 months INR500
I2iFunding 12% and above Up to INR10 lacs 3–36 months INR100
OMLP2P 10.99% and above INR25 000–10 lacs 3–36 months INR100
i-Lend 15% and above INR25 000–5 lacs 6–36 months INR500
LenDenClub 6.5% and above INR25 000–5 lacs 3–24 months INR750

FIGURE 3: OVERVIEW OF THE MAIN PLAYERS IN THE P2P MARKET, INDIA [SOURCE: ANALYSYS MASON, 2020]

16
> ANALYSYS MASON MONTHLY | OCTOBER 2020

About Analysys Mason (including a view in to our

internet transaction advisory experience)
Analysys Mason is a global specialist adviser on We have successfully completed around 775 strategy
telecoms, media and digital (consumer internet). and operations advisory engagements for TMT clients
Through our worldwide presence, we have delivered in over 60 countries in the last 3 years alone.
strategy advice, operations support and market
intelligence to leading commercial and public-sector
organisations in over 110 countries.

Offices located in Europe, the Middle East, Asia and the Americas
For more than 30 years, our intellectual rigour,
operational experience and insight have helped our
clients resolve issues ranging from development of
operator strategy, evolution of national sector regulation
and execution of major financial transactions, to the
deployment of public and private network infrastructure.
Analysys Mason consistently delivers significant and
sustainable business benefits.
We are respected worldwide for the exceptional quality
of our work, our independence and the flexibility of our
teams in responding to client needs. We are passionate
about what we do and are committed to delivering
excellence to our clients. The company has around 260
staff worldwide, with headquarters in London and
offices in Cambridge, Dubai, Dublin, Hong Kong,
Kolkata, Lund, Madrid, Manchester, Milan, New Delhi,
New York, Oslo, Paris, Singapore and Stockholm.

Published by Analysys Mason Limited • 1st Floor, Tower ‘C’, Building No. 10, DLF Cyber City, Phase II, Gurugram, Haryana 122002

Tel: +91 124 450 1860 • Email: consulting@analysysmason.com • www.analysysmason.com/services/Consulting/

Registered in England No. 5177472

© Analysys Mason Limited 2017

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means
– electronic, mechanical, photocopying, recording or otherwise – without the prior written permission of the publisher.

Figures and projections contained in this report are based on publicly available information only and are produced by the Consulting
Division of Analysys Mason Limited independently of any client-specific work within Analysys Mason Limited. The opinions expressed are
those of the stated authors only.

Analysys Mason Limited recognises that many terms appearing in this report are proprietary; all such trademarks are acknowledged and
every effort has been made to indicate them by the normal UK publishing practice of capitalisation. However, the presence of a term, in
whatever form, does not affect its legal status as a trademark.

Analysys Mason Limited maintains that all reasonable care and skill have been used in the compilation of this publication. However,
Analysys Mason Limited shall not be under any liability for loss or damage (including consequential loss) whatsoever or howsoever arising
as a result of the use of this publication by the customer, his servants, agents or any third party.

17
> ANALYSYS MASON MONTHLY | OCTOBER 2020

Key highlights of our Internet experience

 150+ due-diligences of Internet assets in South Asia, South East Asia, Middle East, Africa,
1 and Europe over the last couple years

2  75+ commercial diligences and market assessment in India/South Asia alone

3  First port of call for diligence of Internet assets for marquee investors globally

4  Provided advice on investments worth over USD15 bn over last 5 years

• We have conducted 10+ full commercial diligences of horizont al ecom m erce m ajors in India and South
East Asia region
E c om m er c e
• In more recent years (post the market changes on horizontal ecommerce), we have also conducted 5+
diligences as well as market scan of v ert ical focussed ecom m erce players

• We have been advisors to marquee PE funds and financial institutions on 5+ com m ercial
Hyp er l oc al
diligences of leading hyperlocal delivery players in the grocery and food deliv ery m arket
d el iver y
• We have diligenced the leading players in grocery and food delivery twice in the recent past

• We have supported 10+ commercial diligences of leading digit al w allet providers

Paym ents in India, South East Asia and Middle East regions including the full commercial
an d m ob il e diligence of a leading wallet provider in India
Diligence wal l ets • We have also assisted t elecom operat ors in developing their commercial and
technical digital wallet strategy
experience
in Consumer • We have conducted commercial due-diligence of the leading cab aggregat or in
Internet India 4 t im es for different marquee hedge funds and financial institutions in the
Cab
verticals ag g r eg ation
last 7 years
• We have also provided diligence support on the self-driv e com m ercial car
m arket and leading player in India

• We have conducted full commercial and technical diligence of multiple players across the
Con ten t video and music content value chain (from producers to distributors/streaming assets
in cl u d in g O TT • We have also supported leading m obile operat ors in the region in developing their
C o nt e nt a nd OT T s t ra t e g y

• Over 15 diligences in the classifieds and online t rav el space

• Multiple diligences of m obile adv ert ising, cloud com put ing, SaaS, and AI firms in various geographies
Other s • Full commercial diligence of multiple ed-t ech firms in India
• Assessment of the fint ech (oonline m ut ual funds, t rading, and insurance) in India, with a focus on two
emerging companies

18
> ANALYSYS MASON MONTHLY | OCTOBER 2020

About the authors

Rohan Dhamija, Partner, Head – India (South Asia), & Middle East

Rohan has over 15 years of experience advising investors and corporations across the telecom,
media, and digital/internet industries. He has worked with clients across 5 continents, and currently
serves as the Manging Partner for our India, South Asia, and Middle East practices. He has led a
majority of the firm’s transaction advisory work in the internet and digital sectors, and manages
some of the firm’s most important relationships in that space. Additionally, Rohan’s expertise
includes board-level strategy and transformation topics across the broader TMD spectrum.

rohan.dhamija@analysysmason.com +91 85 275 93560

Siddharth Thakkar

Siddharth over four years of experience as a management consultant in the Telecoms, Media and
Technology sectors with a regional focus on MENA and South Asia. His areas of expertise include
transaction advisory, market sizing, corporate strategy, go-to-market strategy and spectrum
acquisition. He has advised clients across the TMT value chain, including telecoms operators,
tower companies, equipment manufacturers and financial institutions.

siddharth.thakkar@analysysmason.com +91 76 000 00692

Shashwat Mishra, Consultant

Shashwat has over three years of hands-on experience in the technology and telecoms domain.
His experience spans transaction advisory for leading private equity clients and financial
institutions on e-tailers, cab aggregators, tower companies and data centres as well as business
planning, bidding support, go-to-market and commercial strategy for mobile operators and tower
companies.

shashwat.mishra@analysysmason.com +91 96 870 24333

19
Stay connected
You can stay connected by following Analysys Mason
via Twitter, LinkedIn, YouTube or RSS feed.

@AnalysysMason
linkedin.com/company/analysys-mason
youtube.com/AnalysysMason
analysysmason.com/RSS/
analysysmason.podbean.com