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Alibaba In Discussions To Buy Stake In Flipkart


China’s Alibaba Group, which has backed Paytm and Snapdeal, is considering to increase its footprint in India and is discovering the achievement of a stake in India’s biggest Internet firm Flipkart Ltd, according to people aware with the matter.

The discussions are at a very basic stage and the likelihood of an agreement is a function of Flipkart’s readiness to offer a discount on its recent valuation of $15 billion, the sources, requesting that they will not be named.

Alibaba is also talking to Snapdeal, the sources added, but it wants a discount on the company’s recent evaluation of $6.5 billion.

Representatives at Flipkart, Snapdeal and Alibaba did not reply to e-mails looking for comment.

“There are not too many takers for India’s top e-commerce firms at their current valuations, prompting both Flipkart and Snapdeal (run by Jasper Infotech Pvt. Ltd) to approach Alibaba Group for cash, the three people said. While both have enough cash to fund their current burn rates for 12-15 months, they need to raise money this year in order to refill their fast-emptying vaults,” the sources added.

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So far, the two most important e-commerce companies are scared of hitting the market currently, as investors are progressively becoming watchful about supporting mature Internet company’s.

Flipkart’s estimation has climbed five times to $15 billion since May 2014 when it raised up $210 million from DST Global, Tiger Global Management and others. Snapdeal’s assessment has upsurge over 6 times since it upturned $100 million the same month. Ever since then, Flipkart has raised $2.4 billion whereas Snapdeal has raised over $1.3 billion.

If the Flipkart-Alibaba contract goes through, it will make Alibaba one of the three most vital investors in India, together with Tiger Global Management and Japan’s SoftBank Group.

The offered deal may also guide to development in the direction of a long-awaited consolidation of India’s large e-commerce businesses. SoftBank, Alibaba’s biggest investor, is also Snapdeal’s largest supporter.

Since December 31, 2015, Alibaba had cash and cash equivalents of $17 billion, based to the company’s quarterly earnings report.

Chinese company’s are progressively taking interest in Indian businesses as valuations stabilize. In January, China’s travel booking giant Ctrip picked up a stake in MakeMyTrip by investing $180 million.

After an extraordinary funding boom for start-ups in 2014 and the first half of 2015, investors have become watchful because of a mix of worldwide macroeconomic factors like economic slowdown in China and an interest rate hike in the US, along with growing concerns over unconfirmed business models.

Flipkart and Snapdeal, specifically, are facing examination from investors regarding their ballooning losses and the quick expansion of Amazon India, which in July 2014, guaranteed to invest $2 billion in the country over the following few years.

The three company’s are involved in a high-stakes, three-way war for market share, the results of which will benefit shape the future of India’s whole start-up ecosystem.

Within the period of 2015, Amazon increase market share in India at the expense of both Flipkart and Snapdeal, according to publicly available data and numerous company executives. Flipkart, Snapdeal and Amazon India are all private.

With Amazon capitalizing aggressively and showing no marks of cutting back, Flipkart and Snapdeal will have to sustain their spending on discounts, advertising and logistics. Because of this, they will need to keep topping up their war chests every 10-12 months.

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“You will see only a handful of investors, who have the potential to invest, arm-twist even the large unicorns in order to extract stake at cheap valuations,” one of the three people said.

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