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Facebook's Indian foray raises stakes for EM e-commerce firms, such as Jumia

  • Beaten down emerging market e-commerce firms such as Jumia could attract attention

  • Economies of scale will be the lure

  • Investors need to monitor cash-burn rates

Facebook's Indian foray raises stakes for EM e-commerce firms, such as Jumia
Nirgunan Tiruchelvam
Nirgunan Tiruchelvam

Head of Consumers Equity Research

Tellimer Research
23 April 2020
Published byTellimer Research

Facebook has made a US$5.7bn investment in Indian telco company Reliance Jio for a 10% stake – a major vote of confidence in EM e-commerce in the midst of the devastating Covid-19 pandemic. 

Reliance Jio is controlled by Mukesh Ambani, India's richest person, and has reached 388mn subscribers since launching in 2016. It has a 65% market share of the booming Indian 4G mobile market. 

Facebook and Reliance Jio are looking to dominate India' e-commerce. India has 400mn Whatsapp users – the largest number in the world  – and most are Reliance Jio subscribers. The alliance is looking to link consumers with grocers through Reliance Jio's platform.

Online grocery sales are the holy grail of EM e-commerce. The industry is highly dispersed and is ripe for disruption. Few players, not even AliBaba, have mastered it. Moreover, India's e-commerce market is far more dispersed than China's. We think Reliance Jio and Facebook may well be eyeing further acquisitions. 

India e-commerce market share breakdown (%) 

Source: Tellimer Research

Implications for EM e-commerce 

1. Beaten down EM e-commerce such as Jumia could attract attention. EM e-commerce is an alluring prospect for tech giants such as Facebook and Amazon. Facebook and Amazon have net cash reserves of US$54bn and US$81bn. Jumia, which is down 65% since its listing, has played a pivotal role in e-commerce growth in Africa. 

Africa’s internet penetration is on an upward trajectory driven by smartphone usage (the continent is a ‘mobile-first’ market where people typically first access the internet via their mobile devices). The Jumia brand has managed to grow in popularity over the years and is currently regarded as the largest e-retail firm in Africa. 

2. Scale economics will be the allure. Reliance Jio has conquered India's vast 4G market by undercutting the competition. It has priced its data service to target the fortune at the bottom of the pyramid. Its average revenue per user (ARPU) is a mere US$1.42 (INR128). It still has a long way to go as it has only penetrated around-one third of India's market. Jumia and MercadorLibre could be potential targets for a similar approach to e-commerce given the demographic similarities.

3. Investors need to watch the cash burn. In the post-Covid-19 world, the market will be far less forgiving of cash-burning e-commerce ventures. Jumia itself is on course to deplete its cash by FY 21. 

We have devised a proprietary metric – the cash sustainability index (CSI) – that rates companies on their ability to generate cash. Those at the top of the list below are likely to have sustainable businesses as independent entities – MercadoLibre stands out on this metric. Those at the bottom, such as Jumia, are doomed unless a suitor with deep pockets comes around. 

Table: Tellimer's cash sustainability index (CSI) (positive = cash-generative; negative = cash-burning)
StockIndex rating

BABA US Equity


EBAY US Equity


MELI US Equity


CTRP US Equity


AMZN US Equity


BOO LN Equity


MAN FP Equity


ASC LN Equity


SHP SJ Equity


DUST SS Equity


DPEU LN Equity


PIK SJ Equity


ZAL GR Equity


CNV FP Equity


MMYT US Equity


FTCH US Equity


3690 HK Equity


SE UA Equity


JMIA US Equity


Source: Tellimer Research