Alibaba and Flipkart will soon sign a deal if the valuation of the latter is discounted.
AlibabaGroup Holding Ltd. is betting strong on internet-based companies in India. As reported earlier, the company invested above $830 million in Paytm, which has helped it to acquire 30% stakes in the company. Apart from that, it also has a small stake in Snapdeal so now it has been reported that the e-commerce giant is negotiating to invest in Flipkart.
Sources who have knowledge regarding the matter have informed Livemint that the talks are currently in infancy stage. The deal will only be signed when Flipkart shows interest in offering a discount on its present valuation of $15 billion.
Undoubtedly, Flipkart is said to be the biggest e-commerce giant in the Indian market, which was valued at $15 billion right after the company succeeded in getting funding worth $700 million. Alibaba Group is also negotiating with Snapdeal so that it can increase its stakes in the company. Ironically, it is quite similar to that of Flipkart where ‘BABA’ again expects the company to offer a discount on its present valuation worth $6.5 billion. Presently Flipkart and Snapdeal both have ample cash that can be used to fund their present burn rates for at least a year or so.
The Indian e-commerce organization is spending a substantial amount in terms of logistics, advertisements, and discounts since it is constantly in a state of threat from Amazon. The global business has vouched to spend $5 billion in the Indian market in the coming years. Irrespective of the fact that Flipkart is the king of the Indian e-commerce industry, Amazon is striving hard to bridge the gap, whereas Snapdeal, which currently stands at the third position, is working hard to sabotage Amazon in this space.
As of May 2014, the valuation of Flipkart has gone up by almost five times whereas the valuation of Snapdeal has increased by six times, reports Livemint. So if the Alibaba-Flipkart deal is inked, then undoubtedly, the Chinese business will be crowned as the biggest investor in India’s e-commerce segment standing parallel to Tiger Global and SoftBank. According to the company’s recent quarterly earnings call, it had a cash reserve worth $17 billion by the end of the fiscal year of 2015.
The Chinese firms are striving hard to acquire stakes in Indian startups. The previous month, the travel-booking platform in China known as Ctrip has already invested an amount worth $180 million in MakeMyTrip.
Furthermore, Alibaba has also come up with an online space for all small and medium sized enterprises in India under the umbrella of SMILE – Small and Medium Industries Leveraging Export. The idea behind this platform is to push the number of Indian sellers on its e-commerce platform.
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