Alibaba looking for magic lamp of funds in India
China's Alibaba has been in talks with Snapdeal as it looks to enter India's booming online retail industry, according to two people aware of the development. Alibaba, whose mammoth share sale in the US is underway, is considering investment in Snapdeal as one of its options while it sizes up the online consumer market in this country. "India is a huge opportunity for Alibaba," said a person directly aware of the matter. "Eventually it will look at entering the business-to-consumer space in India and talks are on."
The Economics of Crowd Funding
The Chinese company, which is expected to be valued at over $165 billion (Rs 10 lakh crore) at the conclusion of its initial public offer, has discussed a possible investment with Snapdeal, though both firms are yet to reach any conclusion, said the person. So far, Alibaba has only been linking Indian merchants with overseas buyers and sellers. If it enters the Indian online retail space by aligning with Snapdeal, it will be competing directly against market leader Flipkart and Amazon. While the Chinese company would be a late entrant, it has the advantage of size — by sales Alibaba is bigger than Amazon and eBay combined — and cash (it will raise up to $25 billion in the IPO this week) "We are currently in a quiet period," said Pamela Munoz, manager (international corporate communications) at Alibaba, in reply to an email query on the developments. One source estimated that Snapdeal could raise up to $300 million in a potential round of fund-raising. So far this year, Delhi-based Snapdeal has raised a total of $233 million in two rounds of investments, which saw participation from eBay and billionaire Azim Premji's family office Premji Invest. The last round in May valued the firm at $1 billion.
Snapdeal, one of India's biggest online marketplaces, is also attracting attention from other Asian conglomerates including Japan's largest ecommerce company Rakuten and communications provider SoftBank, according to sources in the investment banking community. Snapdeal, in which former Tata Group head Ratan Tata has a personal investment, could well be the vehicle to infuse a predominantly Asian flavour to Indian online retail, expected to be worth Rs 50,000 crore by 2016, according to market rating agency Crisil. A spokeswoman for Snapdeal declined comment for this report.
The Ifs and Buts Remain Though
However, in an earlier interview, co-founder Kunal Bahl had said that while "lots of external investors are interested in this space, and are very interested in Snapdeal", his company will "decide when is the right time to raise money, from whom, how much and at what value". Bankers are of the view that Rakuten's aggressive track record of acquisitions this year, including messaging app Viber and rebate site Ebates, purchased last week, makes it a prime contender in the investment sweepstakes for Indian Internet commerce. For Softbank, any potential deal could hinge on approval from local partner Bharti Group.