Infibeam Incorporation Ltd has had an eventful couple of months. The operator of India’s only listed e-commerce firm has made a couple of acquisitions, buying e-tailer Snapdeal’s tech solutions arm Unicommerce as well as snapping up UAE-based digital payments processing company Vavian International.
The Ahmedabad-based company recently announced that its e-commerce arm had achieved break-even for the first time while its consolidated net profit grew 53% in 2017-18 thanks to a bump from its payment gateway business, CCAvenue.
And a few days ago, Infibeam made a high-profile hire by roping in former Snapdeal and Housing.com executive Jason Kothari to head its international operations.
In an interview with TechCircle, Infibeam managing director Vishal Mehta spoke about why he has reservations about scaling up the e-commerce business and his plans for the payments division.
It was a good Q4 for the company with the e-commerce unit breaking even. How do you view the performance?
I can’t say that it is going to be like that forever. That business is contributing a very small portion to the overall revenue. But with the recent GST (Goods and Services Tax) changes, which creates a common ground for all states, it is possible. If you are able to aggregate the product tail— items which do not sell a lot — then it becomes an interesting business model for us.
For Infibeam, web services - the payments and the platform framework that we offer - is fuelling our growth. It is accounting for the majority of our revenues. If you actually go into our results, you will see the segmentation by product revenue and service revenue.
Product is the GMV (Gross Merchandise Value). Services are where we record the commissions on payments and others. And whenever we offer our platform to any merchants, it comes under services revenue. For us, services, by design, have very high EBITDA (earnings before interest, taxes, depreciation and amortisation) margins. Around 70% of revenue comes from services.
How much does CCAvenue contribute to your topline and bottomline?
When we merged the company, we offered the platforms and payments together. That means you can come up with hybrid models saying that you will only charge on payments, which is all transaction-based and not necessarily upfront fee-based or a subscription-based.
We had a subscription base earlier and when we actually acquired Infibeam in 2016-17, we started merging the platform and the payments piece. Hence, what you do is give the service on a variable cost base, and not on a fixed cost. So you can imagine that payments will account for a good portion of the revenue.
How is the Unicommerce acquisition helping you?
Unicommerce is an asset which essentially provides warehouse management solutions on the cloud. It has everything to do with inbounding, storing and shipping with invoice. That means you run the entire software in the warehouse.
Unicommerce has more than 10,000 sellers on the framework just in the warehousing piece alone. That means we provide warehouse management with our platform framework and that becomes an omnichannel framework for us.
Is there scope for scaling up the e-commerce business or are you planning to sell it off eventually?
When I know I can make money from it, I will scale it up. And we will have to experiment more and more. It is a classic example. Why do people lose money? Because you have negative unit economics and then scale up the business, which results in more losses.
Will Infibeam become a payments company in the future?
Payments is an important part of the ecosystem. We call it web services, because web services include platforms and payments. Becoming just another payment gateway versus providing platform and payments are very different propositions. For example, we recently introduced BillAvenue, which is for utility payments. Now, it is not just a payment gateway but offers both a platform and payments. It is a very sticky ecosystem.
After starting out as a B2C venture, the company is more of a B2B business now. What is the key to selling that side of business to public market institutional investors and what are the learnings from being a listed internet firm?
You have to communicate your plans to people. That is the most important part. This business is new to many in India. The important part is to educate people about it.
Most people think of e-commerce as B2C only, but many B2B companies have come up globally over the past years.
Around 2015-16, Shopify (a Canadian e-commerce firm) went for an IPO (initial public offering). And if you look at Shopify’s history, when it added payments to its framework, the company's market capitalisation rose significantly. So let us focus on what we do and keep on executing.