Can Amazon Charm India?

By Rick Aristotle Munarriz | More Articles
January 23, 2012 | Comments (1)

Amazon.com (Nasdaq: AMZN ) is betting on growth in India.

The world's leading online retailer is in the process of opening a fulfillment center in the world's second most populous nation.

There's no denying that India will be an important market for any Web-based retailer with global intentions, though just because Amazon is setting up a physical presence in Mumbai doesn't mean that the rupees will begin pouring in right away.

Despite its large population, Internet connectivity is still a luxury in India. India's Draft National Telecom Policy promises to ramp up Web access throughout the country, but it's not going to happen overnight.

Let's consider India's three dot-com pure plays that trade on stateside exchanges.

Rediff.com (Nasdaq: REDF ) runs a popular portal in the densely populated nation, but it's still a tiny and slow-growing company that lacks profitability. Revenue climbed just 1% to just $5.1 million in its latest quarter.
Sify (Nasdaq: SIFY ) provides connectivity, hosting, and other IT-related services through India, giving it a front row seat to this quiet revolution. Revenue grew by just 6% in its latest quarter, but Sify's deficit did narrow substantially.
MakeMyTrip (Nasdaq: MMYT ) is the speedster in the group. The Indian travel portal saw its revenue surge by 84% in its latest quarter, though it's barely profitable at the moment.

In other words, India still has some room to go before it begins moving the needle for a company as large as Amazon. Besides, Amazon is already subsidizing shipping on deliveries into India placed through its U.K. storefront. The fulfillment center will really be about making it more profitable to do business in India.

It's a smart move, but investors need to be patient. India's dot-com revolution wasn't dialed up in a day.

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If you want to follow India's Internet companies, consider tracking Sify Technologies, Rediff.com and MakeMyTrip through My Watchlist.

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The Motley Fool owns shares of Amazon.com. Motley Fool newsletter services have recommended buying shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

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Report this Comment On January 23, 2012, at 9:27 PM, 10yearitch wrote:

I am shocked at the revenue number for Rediff !
How are they even surviving ... They have messed up the portal with ads all over the place.
I digress ....
I think Amazon will do extremely well in India. Lot of folks in the metros have been using amazon.uk and .com to buy stuff and ship to their family and friends overseas and collect it whenever someone makes a trip ... amazon.uk was shipping to India too ... this was being used by a lot of folks ...
Looking forward to amazon.in :)
- Madhu
http://10yearitch.com

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