India: The Next Frontier?

Another Internet portal, are you kidding? We get tired of hearing about all
of the new portals becoming available. Sure, we want options, but come on!

Well, having said that, rediff.com India
Ltd. is an Internet portal focusing on India and the global Indian
community. Their competition is limited mostly to U.S. based portals like
AOL, Yahoo!
and so on.

The price range on their IPO is $10-12, the lead underwriter is Goldman
Sachs & Co. and the proposed ticker symbol is REDF.

Rediff.com’s Web site currently consists of 17 interest specific channels,
extensive community features, local language editions, sophisticated search
capabilities, and online shopping. Yes, it is all provided for free. Their
channels include sports, travel, finance, news, education, movies, special
events, astrology, weather, and airline and train schedules. These channels
are tailored to Indian interests and provided in English, Hindi, Tamil,
Telugu and Gujarati.

Rediff.com has received the PC World Readers’ Choice “Best Indian Web site”
award for 1997, 1998 and 1999. Their monthly page views have grown from
approximately 13.2 million in April 1999 to approximately 70 million in
March 2000.

Rediff.com still has to overcome the fact that access to personal computers
and the Internet in India is far lower than in the United States. According
to the International Data Corporation (IDC), in 1999 India had approximately
1.0 million Internet users compared
to a total population in India of 986.9 million. And, alternate methods of
obtaining access to the Internet, such as through cable television modems or
set-top boxes for TVS, are currently unavailable in India.

Internet usage rates have grown in recent years since the Government of
India opened the Indian Internet Service Provider market to private
competition in 1998. IDC projects that the number of Internet users in
India will increase from 1.0 million in 1999 to over 11.3 million by 2003,
and that e-commerce spending in India will increase from $9.7 million in
1999 to $1.6 billion by 2003.

The Indian e-commerce market is also in its early stages compared to the
U.S. e-commerce market and because of low credit card penetration levels in
India, they offer their users the option to use a C.O.D. payment method.

Revenues have not been exceptional, but they have grown from $515K in fiscal
1998 to $1.9 million in fiscal 2000. Also, as of March 31, 2000, their
accumulated deficit was $8.6 million, which is not too bad for a young
company.

But will Rediff.com be a good IPO? The risks of focusing on an Internet
portal for India are high, however the advantage of being a first mover can
bring great rewards if the Indian Internet market increases as expected.