Chinese online retail behemoth Alibaba is betting big on Indian Internet firms. After investing more than $830 million in Paytm for about 30% stake and picking up a minority stake in Snapdeal, Alibaba is now in talks to invest in Flipkart. Three individuals familiar with the matter told Livemint that the talks are still in early stage. The likelihood of a final deal depends on Flipkart’s willingness to offer a discount on its current valuation of $15 billion.
Alibaba wants a discount on valuations of Flipkart, Snapdeal
Flipkart, India’s largest e-commerce player, was valued at $15 billion in its latest funding round of $700 million. The Jack Ma-led company is also in talks with Snapdeal to increase its stake in the latter. But again, Alibaba wants Snapdeal to offer a discount on its current valuation of $6.5 billion. Both Snapdeal and Flipkart have enough cash to fund their current burn rates for 12-15 months.
The Indian e-commerce players are spending heavily on discounts, logistics, and advertising amid fierce competition from Amazon, which has committed to invest $5 billion in India in the next few years. Though Flipkart remains India’s top e-commerce firm by a distance, Amazon is closing the gap. The third-ranked Snapdeal is looking to beat Amazon in the e-commerce war.
Alibaba may become one of the largest investors in Indian e-commerce space
Since May 2014, Flipkart’s valuation has increased five times while that of Snapdeal has gone up six times, according to Livemint. If Alibaba-Flipkart deal goes through, the Hangzhou-based company will become one of the largest investors in Indian e-commerce sector alongside SoftBank and Tiger Global. According to Alibaba’s latest quarterly results, the company had $17 billion cash at the end of 2015.
Chinese companies are increasingly picking up stakes in Indian startups. Last month, Chinese travel booking platform Ctrip invested $180 million in MakeMyTrip. Alibaba has also launched an online platform for Indian small and medium enterprises (SMEs) called SMILE (Small and Medium Industries Leveraging Export) in order to double the number of Indian sellers on its platform.