Alibaba is looking to buy stake in Flipkart and Snapdeal if they decide to offer discounts on their current valuations.
Alibaba Group Holding is currently not only looking to focus on its domestic growth but wants to increase its influence in the international markets as well. According to sources, it is believed that the Chinese tech company intends to purchase stake in one of the biggest Indian online retailer, Flipkart.
The e-commerce giant previously supported two Indian startups known as Snapdeal and Paytm but it is looking to further increase its presence and influence in the Indian market hence it is exploring to acquire stake in India’s largest internet firm, Flipkart.
The sources familiar to the matter told that the talks between both parties are at an initial stage and the result is mostly dependent on Flipkart. Three people with detailed knowledge of the matter reported that only if Flipkart is willing to offer a concession on its current value of $15 billion, then Alibaba Group might carry forward this deal in the future. Three people asked not to be identified in public because of the confidentiality of this matter.
The Chinese e-commerce giant is also in negotiation with another Indian company, Snapdeal, and it wants a discount on Snapdeal’s current valuation of $6.5 billion. Alibaba wants to grow its footprints in the region, two of three people said. So far, the spokespersons of Alibaba, Flipkart, and Snapdeal have not responded to the e-mails, which sought comments regarding this matter.
It is believed that there are not ‘too many’ takers in the Indian e-commerce market as of now which will approach Alibaba for cash in order to encourage Snapdeal and Flipkart to offer discounts. People told that both companies have enough money to fund their existing burn rates for the next one year. However, they will have to raise money in 2016 if they want to refill their fast emptying wallets. The cash, which they have to invest, is not enough to keep on going for eternity hence at some point they might need investments from other big tech firms.
Since May 2014, the valuation of Flipkart increased five times to $15 billion after it raised a massive $210 million from Tiger Global Management, DST Global, and others in a funding round. Snapdeal is also raising enough money to be right behind Flipkart in India’s e-commerce market. Its valuation increased six times when it raised $100 million in the same month in response to its funding round. Ever since then, both have raised enormous amounts worth $2.4 billion and $1.3 billion respectively.
If Alibaba’s deal with Flipkart goes through on mutual consent, it will make the Chinese firm one of the most important investors (out of 3) in the region. The other two are Japan’s SoftBank Group and Tiger Global Management.
One of the three people said, “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.”
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