Unlocking the growth potential of Indian tech companies with the launch of ONDC

India’s burgeoning e-commerce market is expected to reach US$120 billion by 2026, a more than a threefold increase from US$38 billion in 2021, according to a joint report by FICCI-Anarock. 

Despite the booming market, the Indian e-commerce sector is largely dominated by a few big players like home-grown online marketplace Flipkart and global tech giant Amazon. The government’s push to bolster the sector through favourable policies and tech infrastructure development is expected to democratise digital trade in the country and propel the next wave of growth for the e-commerce sector.

Indian e-commerce market has tremendous potential with the right support

One game-changing initiative is the Open Network for Digital Commerce (ONDC) established by the Department for Promotion of Industry and Internal Trade (DPIIT). 

Within the next five years, the ONDC aims to sign up 900 million buyers and 1.2 million sellers and enable US$48 billion in gross merchandise value. In the next two years, the initiative aims to raise e-commerce penetration in the country to 25% from the current level of 5%. 

With an aim to promote open networks for all aspects of the exchange of goods and services over digital or electronic networks, the government-backed network is expected to shape the future of e-commerce by providing a level playing field for millions of local e-commerce players and tech start-ups across the country. 

As ONDC opens up the opportunities and levels the playing field, the next set of challenges for these up-and-coming e-commerce and tech companies will be to scale fast and capture the upside while keeping profitability in check.

Debt financing is critical for start-ups to scale and grow

The Southeast Asia e-commerce sector has much to offer when it comes to unlocking and supporting growth. Southeast Asia’s digital economy has expanded and developed rapidly in the last decade, and has drawn a great deal of attention due to its growth potential. 

Southeast Asia’s digital economy is expected to grow to US$1 trillion by 2030, and this is where DBS saw an opportunity in debt financing. DBS, as one of Asia’s leading banks, has embedded itself in the ecosystem of the digital economy and played a key role in maximising the growth of next-generation companies by closing the funding gap and enabling digital solutions towards sustainable growth. 

For instance, the bank recently established the Digital Economy Group (DEG) which is dedicated to supercharging the growth of emerging tech companies by providing strategic advice and innovative growth debt solutions.

Santanu Mitra, Managing Director of DEG, explains: “The key objective is to help start-ups by advising them on not just equity fundraising, debt fundraising, and product ecosystem financing, but also provide strategic support.” 

Furthermore, Mitra sees DEG fitting into the debt space seamlessly. “We started thinking about how we structure debt solutions, and began evolving our banking products to bring the pool of capital directly to start-ups to meet their capital needs and turbo-charge their growth. This way, there is no equity dilution for the founders and the venture capitalists.” 

DBS also jointly developed a growth debt fund with Temasek—named EvolutionX Debt Capital—to act as the catalyst for businesses ranging from start-ups to unicorns.

“EvolutionX Debt Capital has been set up to address growth debt with a ticket size of 20 to 50 million US dollars across Asia,” says Mitra.”

Southeast Asian case studies show debt financing coupled with strategic support is invaluable

It is evident from success stories that have emerged from Southeast Asia’s e-commerce space, just how powerful the combination of debt financing and strategic support can be.   

For instance, in 2021, DBS extended an Rp2 trillion uncommitted revolving short-term loan without any special guarantees or collateral to leading Indonesian e-commerce company Bukalapak. The loan facility helped to strengthen Bukalapak's financial position and support its strategy to diversify funding sources other than equity.

In addition, DBS co-created an award-winning Virtual Account (VA) payment-type solution that helped eight million small-business owner partners on the Mitra Bukalapak platform reach a large pool of underserved customers. By embedding this payment solution in the platform, unbanked customers — i.e. people who lack access to bank accounts and credit cards — can submit a cash payment through Bukalapak partner outlets.

With DBS APIs enabling real-time online payment and bank verification, Bukalapak merchants can enjoy instant and secure payment processing, providing a new revenue stream through VA payments and ensuring seamless and scalable reconciliation.

In India, the bank has partnered with leading dairy-tech startup Stellapps to promote digitalisation amongst small dairies across the country and create a positive impact in the community. The partnership is expected to benefit over 100,000 dairy farmers in the near future. 

In line with its vision to support promising startups in India, DBS Bank India has joined hands with startup venture capital fund Anthill Ventures and evangelist network Headstart Network Foundation to launch DBS Business Class foundED in April this year. The forum will bridge the gaps in the technology and capital spectrum of the startup ecosystem by bringing the right stakeholders to co-invent and co-innovate, thereby fostering collaborations in the startup ecosystem. The inaugural foundED forum was held in Hyderabad and attended by founders, investors, and tech ecosystem partners, and the subsequent forums will be held across various cities in India, including Bangalore, Chennai, and Musmbai.

Another example is Singapore’s leading car marketplace, Carro. In its early stages, Carro partnered with DBS to create Singapore’s largest direct buyer-to-seller car marketplace. Explains Aaron Tan, Co-founder and Chief Executive Officer: “Our relationship with DBS Bank extends beyond the traditional banking infrastructure. We were able to leverage the bank’s network of customers, as well as the bank’s know-how and the brand’s reputation.” 

Indian tech start-ups can unlock the potential of the digital economy by tapping into DBS’ expertise to maximise their growth as they ride the next wave of e-commerce sector growth on the back of the successful implementation of the ONDC network.

Visit dbs.com.sg/corporate/industries/digital-economy-group to learn how DBS’ Digital Economy Group can help you find the business solutions you need to maximise your growth.

This article was originally published on ET Tech website.