Alibaba is in talks with Snapdeal to invest $1 billion in the Indian e-commerce company. Jasper Infotech, which owns and operates Snapdeal, is seeking a combination of a marquee name and deep pockets as competition in the Indian e-commerce market intensifies. Two people directly aware of the talks told The Economic Times that Snapdeal has received a term sheet from Alibaba.
Snapdeal executives visit Alibaba headquarters
Last week, a team of top Snapdeal executives, including co-founder Kunal Bahl, was in Hangzhou for negotiations with Alibaba. The Indian online marketplace is looking for a valuation of $5 billion in the newest funding round. Last year, Snapdeal raised $627 million from SoftBank, which valued the company at $2 billion.
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In February, Alibaba invested $575 million for a 25% stake in India’s One97 Communications, which owns and operates the rapidly growing mobile commerce marketplace Paytm. During his visit to New Delhi late last year, Alibaba founder Jack Ma held a meeting with Snapdeal co-founder Kunal Bahl, fueling speculations that Alibaba might pick a stake in Snapdeal. There is no reason Alibaba can’t invest in both Paytm and Snapdeal.
PE firms making higher offers than Alibaba
Snapdeal is locked in a fierce battle with homegrown Flipkart and Amazon to dominate the Indian e-commerce sector. Flipkart, the largest online retailer in the country, raised $1.9 billion last year. It is looking to raise another $1.7 billion this year to maintain its stupendous growth. Last year, Amazon announced to invest $2 billion in India to expand its presence. All of them are burning a large amount of cash to offer steep discounts to attract buyers.
One of the sources told The Economic Times that private equity firms are making higher offers than Alibaba for a stake in Snapdeal. So, it is likely to be a joint investment in the next funding round. Morgan Stanley analysts expect the size of Indian e-commerce market to grow from $11 billion in 2013 to $137 billion by 2020.
Alibaba shares rose 0.45% to $83.34 in pre-market trading Wednesday.