Unicommerce eSolutions IPO: Hidden Risks Beneath the Gloss

Unicommerce eSolutions Introduction

Unicommerce eSolutions, founded in 2012, is a leading e-commerce enablement SaaS platform. The company provides a comprehensive suite of cloud-based solutions designed to streamline e-commerce operations for D2C brands, sellers, and logistics service providers.

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Brief about

Summary of the business of Unicommerce eSolutions

Unicommerce eSolutions provide e-commerce enablement Software-as-a-Service (“SaaS”) platform in the transaction processing or nerve centre layer that enables end-to-end management of e-commerce operations for brands, sellers and logistics service provider firms. Unicommerce eSolutions SaaS products, such as the warehouse and inventory management system, multi-channel order management system, omni- channel retail management system, and seller management panel, act as the nerve centre for e-commerce fulfilment operations of clients, enabling them to efficiently manage their journey of post-purchase e-commerce operations.

History of Unicommerce eSolutions

Unicommerce eSolutions Company was originally incorporated as ‘Unicommerce eSolutions Private Limited’ at New Delhi as a private limited company under the Companies Act, 1956, pursuant to a certificate of incorporation dated February 2, 2012, issued by the Registrar of Companies, Delhi and Haryana. Unicommerce eSolutions Company was converted from a private limited company to a public limited company pursuant to a special resolution passed by Shareholders on December 19, 2023, and the name of our Company was changed to ‘Unicommerce eSolutions Limited’. A fresh certificate of incorporation dated December 26, 2023 was issued by the Registrar of Companies, pursuant to the change of name of Company on conversion to a public limited company.

Promoters & Board of Directors

• AceVector Limited (formerly known as Snapdeal Limited) is our Promoter.

Board of directors

Share Holding pattern

Qualitative Factors

• Largest e-commerce enablement SaaS products platform in the transaction processing or nerve centre layer, in terms of revenue for the financial year ended March 31, 2022 (Source: Redseer Report), acting as the nerve centre for business operations of our clients;
• Comprehensive and modular suite of products with a wide range of plug-and-play integrations makes us an integral part of our client’s tech stack;
• Large, growing and diversified base of marquee Indian and global clients with long-term relationships and the capability to upsell or cross-sell new and additional products;
• Proprietary technology platform built for scalability and high adaptability to accommodate various uses across different industries;
• Consistent track-record of fast, profitable growth with strong cash flows over the past three financial years; and
• Strong governance practices, experienced management, and marquee investors.

Strategy

• Continue to expand our India business;
• Drive expansion in current international markets and expand our global footprint over time;
• Enhancement of our existing SaaS products and building advanced features for more use cases;
• Investment in and development of our recently launched SaaS products and develop additional, complementary products to expand our portfolio of offerings; and
• Continue track record of strong financial performance & expand Adjusted EBITDA Margin % with increased operating leverage.

Industry Outlook

Proliferation of eCommerce

The retail sector is rapidly digitizing around the world, with eCommerce sales accounting for 19% of all global retail sales as of 2022. India’s retail and eCommerce sectors, along with that in economies such as SEA and the Middle East, have grown significantly over the past decade and continue to hold significant growth potential in the future.

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The retail sales over the online channel, where orders are generated from websites or mobile applications, across categories – electronics, fashion, beauty and personal care (“BPC”), home and living, grocery, amongst others is referred to as “eCommerce”.

The global eCommerce market reached between US$ 5-6 trillion in 2022, accounting for 19% of all retail sales. China and the USA dominated the market, jointly accounting for approximately 55% of global eCommerce sales. eCommerce penetrations12 in China and the USA are 31% and 15% respectively. In comparison, the eCommerce penetration in India (6%), SEA (13%), and the Middle East (12%) was relatively lower. However, these regions have showed significant increase in eCommerce penetration over the last three years, more than doubling the initial figures.

The global eCommerce market is expected to grow at an annual rate of 9-10% between 2022 and 2027, reaching between US$ 8 trillion and US$ 9 trillion and accounting for approximately 22% of all retail sales. The larger eCommerce markets of China and the USA are projected to grow at an annual rate between 8% and 9%. Meanwhile, India, SEA, and the Middle East are expected to experience much higher growth rates of 23-26%, 16-18%, and 18- 20% respectively, providing ample growth opportunities for eCommerce platforms, brands, and enablers in these regions.

Along with eCommerce, Direct-to-Consumer (“D2C”)13 sales are on the rise globally as more businesses move online and adopt omni-channel strategies. In major economies like the USA and China, D2C has made significant strides in recent years. In India, D2C has performed remarkably well, with D2C penetration of eCommerce at approximately 10% in 2022, in-line with the trends in larger economies. On the supply side, the growth of D2C brands is expected to be one of the core growth drivers of eCommerce in India.

The eCommerce market In India reached approximately US$ 55 billion in 2022, accounting for approximately 6% of all retail sales. The Indian eCommerce industry is expected to experience significant growth in the coming years, with an estimated compound annual growth rate (“CAGR”) of over 25%, to reach approximately US$ 170 billion by 2027. The growth of eCommerce in India is driven by several demand side factors, including the growing internet user base, increasing participation of lower-tier cities, diversification of product categories, and changing consumer behaviour.

India is projected to have approximately 350 million online shoppers by 2027.

This is driven by the fact that India has one of the lowest internet data prices (approximately. US$ 0.17/ gigabyte of data) in the world. This has led to a significant increase in internet users, with more than 35% growth over the last three years due to the advent of a major entrant in the telecom market and significant restructuring of data plan prices. Additionally, India’s youthful population is highly inclined to adopt digital solutions, with approximately 27% of internet users shopping online in 2022.

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eCommerce penetration in tier-2+ is low. As it catches up, it will be a significant growth driver.

Despite representing more than 70% of the retail market in India, tier-2+ cities continue to have low eCommerce penetration. However, with the rising internet accessibility and a growing GNI per capita, it is expected to increase in the coming years. Brands are catering to tier-2+ customers through customised solutions and marketing messages. The route to market is simplified due to presence of third-party logistics players. The consumers in tier-2+ cities are increasingly exposed to eCommerce through digital channels like search, social media, shortform videos, global content, etc. With presence of cash on delivery (“COD”) options and other payment solutions, there is increasing trust in online transactions. Further, brands have developed customised websites, mobile applications, and complaint redressal systems in vernacular languages. These measures have significantly boosted eCommerce penetration in tier- 2+ cities.

The Government of India is actively driving interventions that will accelerate usage of eCommerce in such cities, with one notable initiative being the Open Network for Digital Commerce (“ONDC”). This innovative eCommerce solution connects consumers, sellers, and fulfilment partners in a network-centric model, reducing barriers to entry for new players, particularly local retailers, and providing customers with a wider range of choices. This is expected to drive the penetration of eCommerce significantly.

As more people join the internet, the diversity of product categories and the emergence of new micro-categories offered through eCommerce is increasing.

The growth of eCommerce in India has been exponential in recent years. The proliferation of internet access in India has given rise to a new generation of consumers who demand more choice and convenience. This is reflected in the growing number of transactions being made online across a broader range of product categories. In the past few years, the product mix of eCommerce has undergone a transformation, from being over-indexed on electronics and fashion to including sizable contributions of categories such as BPC, home and living, and grocery. Within each category, consumers are seeking products for specific use-clases as opposed to generic ones. For instance, demand for natural ingredient products which target specific skin problems has risen significantly, within the broader BPC category. This is especially proliferated by D2C brands as they have sharper category focus, quicker feedback for customers, and faster routes to market. As these categories continue to grow and mature, it is expected that the eCommerce market will continue to thrive and allow large-scale incubation of new brands.

The rapid expansion of varied ecommerce categories coupled with reducing delivery timelines is an indicator of demand for convenience in India.

In India, the delivery time for eCommerce purchases has dramatically reduced over the past few years, going from an average of 8 days in 2016 to less than 3 days in 2022. This improvement can be attributed to, amongst other factors, the rising popularity of fast-moving consumer goods purchases, quick commerce and increasing usage and penetration of warehousing services. Additionally, the adoption of digital payments in eCommerce has also seen a significant increase. In 2022, approximately 40% of all payments in India were made through digital means, including cards, internet banking, Unified Payment Interface (“UPI”), cash on delivery (“COD”), and emerging solutions such as buy now pay later (“BNPL”).

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Indian SaaS Market & Growth Drivers

The Indian SaaS market was approximately US$ 9 billion14 in FY2022 and is expected to grow at an annual growth rate of over 33% to reach approximately US$ 38 billion by FY2027.

Indian SaaS companies have been doing well over the past few years. With the growth of the Indian SaaS market, there has been significant investor interest in the space. The investments are spread across various sectors within SaaS, which is expected to continue with ongoing disruptions and evolving technology needs across various industries. With time, the revenue potential and size of SaaS companies in India is also growing.

Business Data

Verticals

• Warehouse and Inventory Management System (“WMS”)
• Multi-Channel Order Management System (“OMS”)
• Omni-Channel Retail Management System (“Omni-RMS”)
• Seller Management Panel for Marketplaces
• UniShip
• UniReco

Customer dependency

Competition

Unicommerce eSolutions believe the principal factors that drive competition between vendors in the market include comprehensive platform offering; quality and accuracy of data; breadth and depth of data, ease of use and deployment; tangible benefits and return on investment for clients; data privacy and security; and sophistication of solutions used to manage, maintain and combine intelligence. We believe we compete reasonably across these factors. Further, there is a large and cost-effective talent pool available in India, which converts into lower selling costs for Indian SaaS companies. As a result, Indian SaaS companies can compete better in global markets due to favourable cost structures as well as offer solutions with affordable pricing in Indian market for both enterprise and SMB customers (Source: Redseer Report). We also possess firstmover advantage in the e-commerce enablement SaaS industry, on account of the significant barriers to entry for newer companies in such industry, including considerable investment requirement for building a competing product and high switching costs associated with such products for the clients.

The growth of the e-commerce enablement SaaS industry is intrinsically linked with e-commerce sales. While India’s e- commerce industry is growing, e-commerce businesses and retailers face significant challenges in scaling their operations efficiently (Source: Redseer Report). We effectively address such scaling concerns, by presenting an integrated eCommerce enablement SaaS platform that enables end-to-end management of e-commerce operations for D2C brands, brand aggregators, traditionally offline brands, marketplaces, logistics players, and SMBs through a comprehensive suite of SaaS products as a part of the transaction processing or nerve centre layer. Due to the nature of its solutions, our platform acts as an operating system for businesses to complete day-to-day post-purchase operations efficiently through technology and automation

Business risk factors

• Unicommerce eSolutions business and growth are correlated with the growth of the ecommerce industry in India. Any change in the nature of the ecommerce industry in India will adversely affect our growth and business operations.
• Unicommerce eSolutions business is subject to seasonality. Any change in our expectations of the seasonal changes may adversely affect our business operations.
• A portion of Unicommerce eSolutions business is attributable to certain large clients. Their future actions may have an adverse impact on our business and may affect our business, revenue, profitability and growth.

• Unicommerce eSolutions face competition from and could lose market share to our competitors, which could adversely affect our business, results of operations, financial condition and cash flows.
• If Unicommerce eSolutions are unable to maintain our existing clients or attract new clients, our revenue growth and profitability may be adversely affected.

Financials

Key Performance Indicators

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Balance Sheet

(in ₹ thousand)

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Profit & Loss

(in ₹ thousand, except non-monetary data)

Cash Flow

Amount (in ₹ thousand)

Capital structure

(₹ in thousand, unless otherwise specified)

SWOT ANALYSIS

• Strengths
  • Comprehensive Solutions: Offers a wide range of services including warehouse, order, inventory, and returns management.
  • Strong Integrations: Robust integrations with marketplaces, web stores, logistics providers, ERP, and POS systems.
  • Market Leadership: Established presence and reputation in the e-commerce enablement space.
  • Scalability: Cloud-based platform allows for easy scalability to meet growing business needs.
• Weaknesses
  • Dependency on E-commerce Growth: Business heavily relies on the growth of the e-commerce sector.
  • Complexity: The comprehensive nature of the platform might be overwhelming for smaller businesses.
  • Customization Limitations: Standardized solutions may not meet all unique business requirements.
• Opportunities
  • Expansion into New Markets: Potential to expand services to emerging e-commerce markets globally.
  • Technological Advancements: Leveraging AI and machine learning to enhance product offerings.
  • Partnerships and Collaborations: Forming strategic alliances with other tech companies and logistics providers.
• Threats
  • Intense Competition: Facing competition from other e-commerce enablement platforms and tech giants.
  • Regulatory Changes: Changes in e-commerce regulations could impact operations.
  • Economic Fluctuations: Economic downturns could affect the e-commerce sector and, consequently, Unicommerce’s business.

IPO Details

Unicommerce eSolutions IPO Details

Litigation involved

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