Chairman's Message

Dear Shareholders,

2016 marked another wonderful year for the e-commerce industry, as consumers continued to shift more of their retail spending to the web.

Online retail sales to consumers in the U.S. reached nearly US$ 400 billion in 2016, according to the data provided by the US Commerce Department. This is a 15.6% escalation, compared to the trend in 2015. That's the biggest jump in three years, and far surpasses the growth in retail sales in physical stores, which barely reached 2.6% last year.

2016-17 IN RETROSPECT

We shipped more than 2.8 million orders during the year, with a 97% positive customer feedback. We remain firmly focused on delighting our customers, as we continue to innovate in terms of selection, service and the customer experience by leveraging our technological expertise.

During 2016-17, we achieved a revenue of ₹939 Crores, compared to ₹717 Crores in 2015-16. Our consistent growth in revenues vindicates the strength of our business model; and we are committed to serve our customers with better, faster and cost-efficient solutions in the coming years. Our EBIDTA grew to ₹25.01 Crores in 2016-17 vis-a-vis ₹13.03 Crores in 2015-16; and our net profit surged to ₹13.8 Crores in 2016-17 vis-a-vis ₹7.1 Crores (before exceptional income) in 2015-16.

Our earnings per share touched ₹9.37 in 2016-17 against ₹4.82 in 2015-16. Our strong performance was driven by accelerated e-commerce growth across key markets in the USA. As a company focused on rewarding shareholders for supporting our endeavour, we have recommended a dividend of ₹2 per share, subject to the approval of shareholders at the AGM.

During the year, we focused on achieving greater economies of scale, leading to better efficiencies. These competencies enabled us to gain momentum in an expanding market.

We continued to strive towards optimizing our supply chain, and we made encouraging progress.

We planned to make a structural improvement in our working capital cycle. The objective was to scale seamlessly and make further efforts for long-term value creation. We took measures such as renegotiating contracts with our supplier partners, although it meant sacrificing growth in the medium term.

I am pleased to share that our efforts have started to bear fruit in the form of increased supplier's credit, which diminishes the need for any additional capital and demonstrates our growing importance in the marketplace. We have since moved to a self-sustaining working capital structure, which gives us further headroom to scale and take full advantage of the market momentum.

123STORES
Our e-commerce revenues registered sustainable growth owing to growing scale across product categories. Our proprietary technology platform allows us to scale order volumes with minimal human intervention, enabling us to save costs as we grow volumes.

During the year, we further expanded its catalogue continuing to add products and suppliers and revenue growth was visible across all product categories, displaying a healthy mix of products.

In October, our subsidiary 123Stores, Inc, secured a US$ 8.0 million Line of Credit from UPS Capital®, a subsidiary of UPS®, one of the world's largest package delivery company and a provider of supply chain management solutions. This facility provides added funding to support our growth and strategic initiatives. This financial flexibility will substantially lower our cost of capital, drive significant revenues and profitability to meet our strategic goals as we continue to build long-term shareholder value. We believe that the leverage, that this facility affords us will enable us to eliminate further equity dilution.

GROWTH STRATEGIES
The future holds out significant opportunities for growth. We will continue to work on the following priorities to drive long-term sustainable growth:

  • Widen and deepen our reach among the U.S online shopping population;
  • Enhance technology investments to better serve our customers at competitive prices;
  • Focus more on employee productivity to create a dynamic talent pool;
  • Continue to stay asset light;

We are excited about the long-term prospects of the e-commerce industry in the US and Canada. We have demonstrated our ability to create a robust technology-driven multi-channel retail model, and we will continue to build on our insight. Going forward, we will consistently generate strategies to improve delivery capabilities, remain cost-effective, offer competitive pricing and remain profitable.

On behalf of the management, I take this opportunity to convey my sincere thanks to all shareholders, and place on record my gratitude to employees, customers, channel and logistic partners, bankers and suppliers.

Warm regards,

Arvind Kajaria
Managing Director
24 May 2017

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