From e-comm to QSR: 5 sectors that will fuel start-ups, investors' interest in 2015

With a revival in the business sentiment in the country after the takeover of a new government at the Centre, start-ups are the flavour of season. Will the New Year be able to retain the enthusiasm? Bring in more innovation, new offerings? Which sectors will attract a lot of funding? Which ones will lose focus?

Experts say that those startups that are willing to innovate, offer solutions to possible problems will be the ones to kindle investor interest. Firstpost spoke with a few who wield the baton. These are the common top five sectors that emerged out of the conversation:

E-commerce: The E-commerce industry is valued at $17 billion and is expected to grow at an compound annual growth rate of about 35 percent each year. According to an Assocham-PwC study, it will cross $100 billion in the next five years.

Nearly one-third of internet users make purchases online. The drivers of the industry will be existing buyers than first-time online buyers, the study notes. There are more than 300 million internet users in India.

Most investors feel that designer wear/apparels and electronics which has seen a sizeable investment (39 percent of total retail e-commerce sales, according to Assocham-PwC study) over the last year and half, is expected to contribute 42 percent of sales in 2015.

“I place this sector on top of everything else because I feel that there are still many things that have not been explored here. There is space for many innovative e-commerce sites. I feel this will be the top priority in 2015,” says B Hari, Indian Angel Network, an angel investor company.

Education and Skill Development: In 2008, the UPA government had set up a National Skill Development Coordination Board (NSDCB), coordinated by the Planning Commission with a target of skilling 700 million people by 2022. The country will face a skill gap of 75-80 percent across industry sectors, if we continue the current pace of development, according to the India Skills Report 2014 by the Confederation of Indian Industries.

Though there will be people with the required educational qualifications, they will be equipped with skills that corporates do not require, and jobs that they do not fit.

“Given that PM Modi’s Digital India vision emphasizes on providing online education, I believe players with unique offerings and those that are aligned to the Digital India programme will attract investments,” says Nilotpal Chakravarti, Associate Vice-President, Internet and Mobile Association of India (IAMAI).

Healthcare services: Life expectancy is projected to increase from an estimated 72.6 years in 2012 to 73.7 years by 2017, bringing the number of people over 65 years to around 560 million worldwide or more than 10 percent of the total global population, according to a Deloitte 2014 Global Healthcare Outlook.

This will give rise to an increased need for services in the sector that do not require hospitalisation and medical care, say experts. Mobiles can play an important role here as a diagnostic tool, suggest some.  “I feel that in 2015 mobile monitoring devices will become affordable,” says Shailesh Singh, Executive Director, Seedfund, a Venture Capital fund.

Mobile First: The Indian mobile market is estimated to surpass Japan by end- 2014, reaching the $10 billion mark, according to Counterpoint, a Hong Kong-based market research firm.

Business opportunities stand to benefit if they go first on the mobile phone. Mobiles are the only go-to approach in 2015, agree fund managers.

“A lot of local talent can be expected to break out when businesses intensify through smartphones. Right now, the content is in English but vernacular languages are needed when businesses succeed through mobiles,” says Shailesh Singh of Seedfund.

The quick service restaurant (QSR) sector could emerge the dark horse as the segment is expected to see a lot of traction. With the rising incomes of the urban middle class, eating out culture is gaining currency in the country. The key aspects that will boost growth of this sector are the quality of the food (ingredients, ease of packing) and pricing. According to consultancy firm Technopak, the Indian QSR market is currently estimated at $2.3 billion. It is projected to grow at a CAGR of 16 percent to hit $6.4 billion by 2020.

Other than these sectors, software as a service (SaaS) and digital payments are other two sectors that are likely to see lot of investor interest. The SaaS, as a segment, is is not doing well in India at present. But 2015 may be the year when the Make in India slogan could boost this industry, say fund managers. Digital payments, meanwhile, are expected to get a leg up from the government’s focus on financial inclusion, which is seen boosting digital wallets, mobile money etc.

What won’t work

Experts zero in on three sectors that just won’t see traction in 2015.

Real estate_:_ It has been the most-talked about sector in 2014. However, this sector will collapse in 2015, say fund managers.

ITeS sector: Investor interest will wane in this sector in 2015, say experts, as the sector has more or less matured or saturated. Mergers and acquisition (M&As) will be the key.

Manufacturing: It will not be able to rise to the PM’s expectation of  Make in India slogan as it will take time to mature and garner eyeballs, say fund managers.