Chinese online retailer Alibaba is inching closer to build what Jack Ma calls the “iron triangle” in India. Alibaba and its financial services affiliate Ant Financial already own close to 40% stake in mobile payment service Paytm. The Hangzhou-based company plans to spin off Paytm’s online marketplace and invest further in it. And then it will need the third part of the iron triangle, logistics, to challenge the market leader Flipkart and the US firm Amazon.
Alibaba to close the deal in 4-6 months
Industry sources familiar with the matter told the Economic Times that the Chinese e-commerce giant is looking to buy a majority or significant minority stake in an Indian logistics firm. Alibaba is currently engaged in talks with Delhivery and Xpressbees Logistics, and expects to close the deal within 4-6 months. Other logistics firms GoJavas and Ecom Express have also expressed interest in partnering with Alibaba.
Alibaba has already set up its management team in India ahead of its online marketplace launch by the end of this year. The company said in a statement that it was “absolutely committed to developing in this market for the long-term.” Delhivery and XpressBees already work with Paytm’s online marketplace as third-party logistics partners. Delhivery was valued at $297 million in its latest funding round.
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Alibaba vs. Flipkart and Amazon
The Jack Ma-led company was initially in talks to acquire India’s largest e-commerce player Flipkart. But the two companies couldn’t agree on valuation and terms. So, Alibaba is planning to move ahead by separating Paytm’s payment service and e-commerce business. The move will allow the Chinese company to step up investment in Paytm’s online marketplace because the Indian government allows 100% foreign investment in online marketplaces.
Alibaba is entering the Indian market at a time when incumbents Flipkart and Amazon have already established a strong foothold. Earlier this month, Amazon founder Jeff Bezos announced that the company would invest another $3 billion in its Indian unit. Amazon has already invested more than $2 billion in the country.