Alibaba is interested in buying stake in the online trading company Snapdeal for dominating the Indian E-commerce industry
Alibaba Group Holding Limited, which has been backing Snapdeal and Paytm, is thinking to expand its foothold in India and exploring to acquire the stake in the biggest Indian internet organization Flipkart.
The negotiations are being initially done and the deal’s chance depends on the willingness of Flipkart to provide a discount on its present value of $15 billion, the three people familiar with the matter said, asking to be kept anonymous. The online trading giant is also negotiating with Snapdeal but it is interested in getting a discount on the Indian company’s present value of $6.5 billion.
Spokespersons of the Hangzhou based organization, Flipkart and Snapdeal didn’t respond to e-mails asking them for comments. There are such a huge number of takers for India's topmost electronic commerce companies at their present value, prompting both Jasper Infotech owned company Snapdeal and Flipkart to approach the online retailer for cash.
Whereas both have sufficient cash to finance their current run rates for 12 to 15 months, they should raise funds in 2015 for refilling their rapidly- emptying vaults, the persons added. Yet, the two of the most valuable online trading companies are feared of hitting the market currently as the investors have become cautious onsupporting mature Internet companies.
The valuation of Flipkart has increased by 5 times to $15 billion since May 2014 when it succeeded in raising $210 million from Tiger Global Management, DST Global and other companies. The valuation of Snapdeal has soared by over 6 times since it received $100 million in May. Since then, the Bengalaru based company has received $2.4 billion whereas Snapdeal has received over $1.3 billion.
If the Alibaba-Flipkart agreement goes through, Alibaba will become 1 of the 3 most significant investors in the country, alongside SoftBank Group of Japan and Tiger Global Management. The proposed agreement might also lead to progress towards the most-awaited consolidation of the huge electronic commerce companies of India.
The biggest investor of Alibaba, Softbank is the biggest backer of Snapdeal. The quarterly earnings report of the company has revealed that on 31st December 2015, the Chinese online retailer had cash and cash equivalents of $17billion.
Chinese organizations are seriously taking interest in businesses based in India as valuations have stabilized. In January, the travel booking service provider Ctrip invested $180 million for holding a stake in MakeMyTrip.
Followed an unprecedented financing boom for newly established organizations in 2014 and the first half on last year, investors have become cautious due to a mixture of international macroeconomic indicators like the falling growth of the Chinese economy and a hike in interest rate in the United States and increasing concerns over unproved business models.
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