Alibaba Group Holding Ltd (NYSE:BABA) is currently talking with the Indian e-commerce market Snapdeal. It is owned by Jasper Infotech which is seeking a combination of a marquee name as the competition in Indian e-commerce markets intensifies, according to Reuters.
India’s internet market was $11 billion (gross merchandise value) in 2013. Morgan Stanley (NYSE:MS) is expecting that the Indian internet market will rise from $11 billion in 2013 to $137 billion by 2020. Last week, Snapdeal’s co-founder, Kunal Bahl, and a team of the company’s top executives went to Hangzhou for negotiations with Alibaba Group Holding Ltd (NYSE:BABA). Last year, Snapdeal raised $627 million from Softbank Corp (OTCMKTS:SFTBF) which made the company be valuated at $2 billion. Now, the company is seeking for a valuation of $5 billion in its newest funding round.
“This is an opportunity for Alibaba to get a foothold in India,” said Raja Lahiri, a partner at consultancy Grant Thornton LLP. “A strategic investor’s drives and incentives can be quite different, (they) do not look at these investments from a purely financial viewpoint,” he said.
Snapdeal is in a fierce competition with Amazon.com, Inc. (NASDAQ:AMZN) and Flipkart to dominate the e-commerce sector in India. The largest online retailer in the country, Flipkart, raised $1.9 billion last year. The company is trying to raise another $1.7 billion this year to maintain its amazing growth. Just last year, Amazon.com, Inc. (NASDAQ:AMZN) announced it’ll invest $2 billion in India to continue to expand its presence. All of them, the major e-commerce companies, are investing large amounts of cash so that the companies can be enabled to offer great discounts in order to attract customers.
Alibaba has been watching India for months but had not directly invested in the e-commerce space. In February, Alibaba Group Holding Ltd (NYSE:BABA) invested $575 million for 25% stake in One97 Communications in India. The company owns and operates in the quickly growing mobile commerce market place Paytm. When Alibaba’s founder, Jack Ma, was in New Delhi late last year, he held a meeting with Snapdeal’s co-founder, which powered the speculations about Alibaba might be picking a stake in Snapdeal.
“There is no reason why Alibaba can’t invest in both Paytm and Snapdeal,” Lahiri said.
Raising money is crucial for Snapdeal right now because the company has been using a lot of money to make acquisitions that can enable the company to boost its technology and top line and its competitions have been raising funds at a rapid pace.
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