China’s biggest e-commerce player Alibaba and Taiwanese contract handset manufacturer Foxconn are in advanced discussions with Snapdeal to buy about 10 per cent in the Indian company for $500 million.
While Alibaba and Snapdeal have been in talks since March, Foxconn is a new entrant in the negotiations.
Though the initial discussion fell through due to differences in valuation, Alibaba came back to the table in May after roping in Foxconn, according to sources familiar with the development. Snapdeal declined to comment.
Foxconn makes phones for global brands such as Microsoft and Apple. Recently, Foxconn’s Chairman, Terry Gou, had said that his firm was aiming to develop 10-12 facilities in India, including factories and data centres, by 2020.
Analysts said that the discussion with Snapdeal was part of the Taiwanese company’s strategy to invest in start-ups and e-commerce companies as Gou grapples with tight margins in the phone manufacturing business.
Second investment For Alibaba, any investment in Snapdeal will be its second in India. In February, the Chinese e-commerce major had picked up a 25 per cent stake in mobile commerce company Paytm for $700 million. When Alibaba’s founder Jack Ma visited India in April he had indicated that he wants to see a bigger play in India. A stake in Snapdeal would give the Chinese company just that. According to sources, Alibaba has appointed merchant bankers to scout for potential acquisitions in India. A stake in Snapdeal will give the Chinese company a larger share of the Indian e-commerce market.
How Snapdeal gains Strategic investors like Alibaba and Foxconn will enhance Snapdeal’s brand and valuation. Snapdeal has already raised almost $1 billion in funding. It already has Japan’s Softbank as one of its key investors. In October, Softbank invested $627 million in the Indian e-commerce company.
In March, Gou had met Jack Ma and SoftBank CEO Masayoshi Son to discuss a potential partnership. Snapdeal could be the beginning of that partnership.
The company raised $133.77 million (February 2014) as a result of a round led by eBay and $105 million (May 2014) through a financial round that saw participation from institutional investors Temasek, Myriad, Tybourne, Blackrock Inc. and Premji Invest. Ratan Tata, Chairman Emeritus, Tata Sons, also made a personal investment in the company.