Nomura Investment Banking Case

Study Contest
Analyst Call 2015

4TH OCTOBER 2015

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Participant Details
Golduin Retail
1.
2.
3.
4.

Charles Patrick CEO, Golduin

Philip Collins CFO, Golduin
Monica Hernandez Strategy and Operating Officer, Golduin
Claire DSilva EVP, Sales and Marketing, Golduin

Analysts
1. Analyst #1
2. Analyst #2
3. Analyst #3

Analyst 1
1. Could you please provide the breakdown of the consumer durables market in US and India?
What are the growth prospects for the same?
The consumer durables market includes two components: consumer appliances and consumer
electronics. In the US, Consumer Electronics is valued at $102bn currently, but growth has
plateaued, and is expected to decline by 3-4% further on. We expect that the overall growth in US
consumer durables will be driven by appliances. A similar trend is expected in India, where the
consumer electronics segment is valued at $32bn. The segment has shown flat forecasts in terms
of value. However, this is because of the reducing prices of mobile phones due to the rapid
advancement in semiconductor technology and deep discounts necessitated by stiff competition
from indigenous players. This fall in prices offsets the volume growth seen in the country.
2. Has Golduin invested in an app? If yes, could you share some statistics about the number of
users and revenue generation through the app?
We have a mobile app across all the relevant platforms and operating systems. Around 35% of all
the transactions processed by Golduin are generated through its mobile platform. The revenue
structure for advertisements, preferential visibility and vendor listing on the app is the same as for
the website.
3. Could you provide some clarity about the marketing strategy of Golduin?
We have invested heavily in our marketing campaigns and will continue to do so in the near future.
We have always believed in positioning ourselves according to the market that we cater to,
occasionally even rebuilding our brand identity to suit our growth path and vision. We cater to
several consumer segments, ranging from ubiquitous electronics to niche sportswear. So we have
made sure to tap all possible channels of communication to reach our end-users, relying especially
on social media.
4. Could you please provide some guidance about profit margins?
Margin guidance could depend on a number of factors, and is subject to revisions. However, we
can disclose that we have plans to develop an in-house payment system. We have a strong team
of IT professionals and data analysts, which we want to use to our advantage. Due to higher
investments in sales force, IT infrastructure (data centers) and fulfillment centers we expect our
EBIT margins to decrease by 100bps over next 5 years.
5. Is the management willing to opt for a dual-class share structure after listing? What will be
the status of the current convertible/preference shares/option pool?
We would prefer a single-class listing. However, we are willing to explore the possibility should
there be a compelling argument for dual-class shares. There are no convertibles, preference
shares or option pools outstanding as of the latest financials provided.
6. How has Golduin financed its past acquisitions?
All our acquisitions have been all-cash deals financed through a combination of debt and proceeds
of funding rounds.

Analyst 2
7. This sector has been characterized by intense competition. Who do you view as your
competitors and how do you plan to mitigate the pricing pressures that are common in Ecommerce?
We face major competition from all of the established global e-commerce players as well as niche
e-tailers. Our competitors include e-commerce companies with various business lines, business
models and geographic ranges. Some brick-and-mortar stores, while not directly comparable, are
also our competitors due to similar product offerings. However, our refined business model and our
brand allow us to maintain our pricing and margins at a level that is competitive, as well as
sustainable.
8. With the switch to marketplace model leading to a large increase in number of vendors, do
you think the differentiating strategy is getting diluted?
We believe that we must rebrand ourselves and diversify into new product areas and segments to
sustain in this industry. We found that that the method we employed to differentiate ourselves was
not sustainable due to the inherent shortcomings of our inventory-based model. So we switched to
the marketplace model and acquired more vendors in order to become more competitive in terms
of product portfolio and prices. Our new model has also allowed us to employ selective control over
our inventory by means of fulfillment centers, which retains our original value proposition.
Additionally, it has also enabled us to break even, which is quite rare in the industry.
9. Could you provide the forecasted revenue growth rates and the forecasts for the revenue
mix?
We expect to grow at the industry rate of different segments, at the very least. Our revenue mix
evolves as per the segment-wise and geography-wise growth rates. We see most growth coming
from emerging markets.
10. What are Golduins investment plans over the coming years?
Since the switch from inventory-based model to marketplace model, most of our capital investment
is made in fulfillment centers, which are a key element of our business. In the past, we have
converted our old warehouses into fulfillment centers. In order to cater to the growing customer
base, we intend to set up 2-3 fulfillment centers through 2020, at an estimated cost of $10m-15m
per fulfillment center. For this estimate, we have taken into account the growth of our fast-moving
merchandise in the relevant geographies.

Analyst 3
11. How does Golduin currently project growth in the vendor base?
We have a strong vendor base of over 400,000 today, having started out with a much smaller
number. The initial growth in the vendor base was achieved through strategic acquisitions.
However, our recent growth has largely come through organic expansion as the company
increased its presence across geographies. We see our vendor base growing in line with the
customers as we increase our reach across geographies and product lines.
12. What sellers do you currently identify as premium?
Advertising is a significant revenue stream for us. We allow sellers to advertise their products on
our portal for a fee, which depends on the number of clicks the advertisement receives. Sellers,
who pay for this service to give their products preferential visibility, are identified as premium
sellers. This identification is not related in any way to the nature of the products offered by the
seller.
13. How do you expect the revenue stream for Golduin to evolve over the next 5 years, given the
majority of the revenues are driven from vendors?
We generate majority of our revenues from commissions charged as a percentage of GMV from
vendors across geographies. We do not expect any significant rise in the commissions charged,
given our objective of expansion in the fiercely competitive emerging markets. Also, a reasonable
amount of revenue also comes from the segment Other Revenues, which primarily includes
facilitation fees charged for the use of fulfillment centers This fee is charged as a percentage of fast
moving products. The expected increase in the number of facilitation centers as a result of future
acquisitions and organic growth is likely to drive the revenues for the same.
14. Could you please provide some details about the top management?
Aside from the founder, John Doe, we have:
Key Management:

Charles Patrick CEO

Holds the position since 2012, when company shifted to marketplace model

15 years of experience in a major American consumer appliance company

Philip Collins EVP, Finance and CFO

Holds position since 2011

Previously: Head of Audit and Control (2008-11)

CPA by profession and a certified company secretary

Claire DSilva EVP, Sales and Marketing

Holds position since 2013

Previously served as head of e-retail for a major apparel and footwear player in China

10 years of experience in marketing and sales

Board of Directors:

Fiona Davis Non-executive Director

Has been on the board since the companys inception

20 years of experience in marketing and sales

Jiah Sharma Non-executive Director

Has been on the board since 2012

15 years of experience in Consumer Retail in India

William Patterson Non-executive Director

Came on board in 2014

Served as a board member for several e-commerce giants globally, has 18 years of
experience

15. There is an item called unique subscription expense in the notes accompanying the
financial statements, can you please share some more insights into it?
We have always focused on delivering a superior shopping experience, and have thus provided our
customers the option to subscribe to premium services. These include same-day delivery, access
to exclusive product launches, flash sales and extended replacement guarantees. The expense
incurred by us in providing these services is classified as the unique subscription expense. It
depends on the number of customers subscribing to the enhanced services.

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