Looks like Chinese ecommerce giant, Alibaba, plans to bring Indian ecommerce biggies under its umbrella. After investing in Paytm and Snapdeal, Alibaba is now looking out to invest in Indian ecommerce major Flipkart.
People close to the development said that the talks to invest in Flipkart is currently at nascent stage and the likelihood of a deal will depend upon Flipkart’s willingness to offer a discount on its current valuation of $15 Bn.
Flipkart’s was reported to be valued at $15 Bn after it raised $700 Mn from existing investors including Steadview Capital participating in the round.
According to a Livemint report, Flipkart has approached Alibaba to fund its operations in next 12-18 months, as that will be the time when it will have a complete burn down of its current funding.
The report also mentioned that Alibaba is in talks with Snapdeal as well to give a discount on the its current valuation of $6.5 Bn.
Though Alibaba has also invested over $830 Mn in Paytm against 30% stake but it hasn’t asked for any such commitment from the company. Primarily, Alibaba had a 20% stake in Paytm after it raised $680 Mn.
The Alibaba group has been eyeing the Indian businesses from a long time. In April 2015, the group had expressed to make a strategic investment in radio cab service Meru. It also launched an online platform for Indian small and medium enterprises (SMEs) by the name SMILE (Small and Medium Industries Leveraging Export) that would provide an access to global business.
In April 2015 only, Jack Ma, founder and executive chairman of Alibaba Group and one of the richest persons in China with fortunes of about $24 Bn, had expressed his plans to capture larger chunk of the growing ecommerce space in India. He had said that Alibaba would look to acquire firms that can help improve customer experience as well as expand its range of products and services.
Chinese firms are increasingly taking interest in Indian economy. In January 2016, China’s travel booking giant, Ctrip, picked up a stake in MakeMyTrip by investing $180 Mn.
On the other side, Amazon has been trying hard to get a fair share in the Indian market. To some extent it has been a winner as well. Amazon along with Walmart Stores Inc has planned to invest over $300 Mn (INR 2,000 Cr) to build their network and gain a share in the Indian retail market. Besides, Amazon may invest about $5 Bn to build a war chest in India.
However, Flipkart and Snapdeal reported losses of about INR 2,000 Cr and INR 1328 Cr, respectively, in the fiscal year ending March 2015.
Hence, to keep spending on discounts, advertising and logistics Flipkart and Snapdeal need to keep topping up their war chests every 10-12 months.