Entrepreneur Asia: Power Players

Investors give Indian online stores another chance

Gauri Bhatia, Special to CNBC.com

India's online retailers have seen renewed investor interest with big names like Flipkart and Myntra attracting hundreds of millions of dollars in funding. What has changed?

Over the past few months, India's lossmaking online shopping sites have been hitting the headlines, as investors queue up to fund their mega-plans.

These internet start-ups have attracted investments of over $600 million in the last nine months, the highest ever for India, according to Venture Intelligence, a firm that tracks private equity and venture capital deals.

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This aggressive push to fund these entrepreneurs, as they spend lavishly on marketing and advertising in spite of losses, has raised concerns that investor optimism in India's online retailing might be misplaced.

"The interest in this sector is completely rational, I don't think its over-optimistic," says 32-year-old Sachin Bansal, co-founder and CEO of Flipkart, India's largest online marketplace that crossed the $1 billion sales figure mark last month. Started in 2007 by engineering graduates who had worked at Amazon, the entry of Flipkart was seen as a game-changer for the sector, which has since seen stupendous growth.

The e-commerce sector – which has an estimated 200 active players including the big boys like Flipkart, Myntra, Snapdeal and Jabong – is today worth almost $3 billion in sales. And the market is expected to keep doubling over the next few years to exceed $70 billion by 2021.