Alibaba could join hands with Snapdeal to scale up presence in India

MUMBAI – Even as Chinese e-commerce giant Alibaba.com goes public this week in New York with plans to raise up to $25 billion, it is working on strengthening its position in the burgeoning Indian e-commerce market.

The company, which entered the Indian market with a B2B model in 2010, currently does negligible business in the country. However, with fresh funds it is looking to re-enter through Snapdeal, a homegrown Internet business company founded by Kunal Bahl and Rohit Bansal. According to a media report, Snapdeal is in talks with Alibaba to raise a much larger round soon.

However, the report could not be ascertained by either of the companies or any bankers.

Jack Ma-promoted Alibaba is the largest online company in China, and is getting aggressive with its global expansion to take on world leader Amazon in all the markets that the latter is present in. Amazon entered India last year and has already made a commitment of $2 billion to take on leading players such as Flipkart and Snapdeal.

According to industry experts, it makes sense for Alibaba to invest in a company instead of setting up its operations directly. The firm runs China’s two most popular online shopping sites, Taobao and Tmall, and operates a network of services that allow consumers to process payments, buy movie tickets, get lunch delivered, or invest in a money market fund.

“I guess Amazon has significant strength in the developed world and Alibaba is trying to create similar presence ‎in the developing world. At some point they will be head to head but that is some time away in my opinion,” said Harish HV, Partner at Grant Thornton.

Ashish Jhalani, Chairman of consultancy firm E-tailling India said, “There can be multiple angles to Alibaba’s interest in Snapdeal. The first and most probable is that Alibaba would need an Indian partner to quickly gain local scale and Snapdeal would be the best bet as Flipkart is focusing on further securing its leading position. The second would be that investment in Snapdeal would give them a way to test the waters before expanding extensively in India.”

Boston Consulting Group’s Partner Abheek Singhi, during an earlier interaction, said India has huge potential when it comes to e-commerce, adding that the country lags China by seven years but has the potential to grow at $60 billion by 2020. “Alibaba could make it big in China as it has a monopoly there. In India it has to compete with several larger and already established companies. India will be a difficult market to crack,” Singhi added.

Meanwhile, Orious Venture Partners’ founder Rehan Yar Khan said, “it seems everyone wants to invest in Snapdeal. If true this could help bring in lot of fresh investment into the Indian market.”

Of late Snapdeal has become the poster boy of this industry after Ratan Tata, former chairman of the country’s largest diversified conglomerate, showed interest in the company by investing in his personal capacity.

Kunal Bahl in a recent interaction with Business Line said the company has grown 700 per cent in FY 14 as compared to FYI 13. The company has already achieved $1 billion in dollar sales and expects to close this year by more than doubling it.

For Snapdeal, more funds means a larger valuation game. As Bahl in a recent interaction on fundraising plans said, “We have enough funds with us and we have no idea how to exhaust that in a short time.” Flipkart is currently valued at $7 billion and that is the benchmark at present.

Snapdeal has raised a total of $233 million in two rounds of investments from eBay, Nexus Ventures and Premji Invest, among others.