Amazon, Flipkart eye tie-up with IRCTC

MUMBAI/NEW DELHI: Before Flipkart, there was IRCTC, which for most Indians was their introduction to e-commerce more than a decade ago. And even now, revenue from online ticketing on Indian Railway Catering and Tourism Corp rules the roost, having exceeded the combined sales of Flipkart and Amazon India in the year ended March.

While both Flipkart and Amazon each said earlier this year that they had hit a billion dollars in annual gross merchandise value or total value of goods sold, IRCTC generated Rs 15,410 crore or nearly $2.5 billion through online ticket sales in the last financial year, up 24% from a year ago when it sold tickets worth Rs 12,419 crore. The figures are sourced from RoC filings.

Amazon, Flipkart eye tie-up with IRCTC

Amazon and Flipkart are in talks with IRCTC as they look to tap the railway portal’s existing database of more than 21 million consumers

Since IRCTC doesn’t compete with any of the online marketplaces in India, both Amazon and Flipkart are in talks with the government-owned portal as they look to tap the railway portal’s existing database of more than 21 million consumers.

“Tie-ups with portals like Flipkart, Amazon etc are in the process under which these portals would like to sell their merchandise through IRCTC’s portal, it being one of the largest e-commerce sites in the entire Asia-Pacific region,” said Sandip Dutta, public public relations manager at IRCTC, which set a record in March when it booked 5.80 lakh e-tickets on a single day. That compares with 27 tickets a day when it began in 2002.

The government-owned portal posted a 33% increase in income at Rs 954.7 crore, which mainly includes service charges on tickets, sales of Railneer water, onboard catering services and licence fees from outsourced catering vendors. This is similar to online marketplaces where sales don’t include actual goods sold but instead count commission from sellers and revenue from advertisements on their e-commerce sites. Amazon Seller Services posted revenue (commissions) of Rs 169 crore while Flipkart Internet, which manages the portal, had total income of Rs 179 crore.

But unlike these privately owned marketplaces, IRCTC posted profit after tax of Rs 72 crore, up from Rs 59 crore in the previous year. Amazon, which entered India a year ago, posted a net loss of Rs 321 crore while its biggest rival Flipkart more than doubled losses to Rs 400 crore.

Despite having a monopolistic position, higher web traffic and sales, IRCTC can’t command a valuation similar to Flipkart or Snapdeal, feel experts.

“Being a government company, its slow decision making, red tapism, less innovation leads to non interest by investors, which in turn leads to a lower valuation. Margins of travel are much lower than margins commanded by selling goods online too,” said Rakesh Nangia, founder and managing partner of Nangia & Co, a tax and transaction advisory firm.

Also, e-commerce companies sell a wide variety of goods unlike IRCTC, which is mainly a ticketing website with no product mix, making it a less scalable business. According to a report by consulting firm Technopak, the $2.3 billion e-tailing market is expected to swell to $32 billion by 2020 and account for 3% of the total Indian retail sector by then.

IRCTC, on its part, tried widening its business by partnering Yebhi.com in a revenue-sharing model last year. Electronics, clothes and home furnishings were sold on the IRCTC site, which also promoted online shopping with a link to Yebhi’s portal. However, the year-long contracted wasn’t extended.

 

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