Even as Chinese e-commerce giant Alibaba.com goes public this week in the New York Stock Exchange with plans to raise up to $25 billion, the largest ever IPO so far, it is working on strengthening its position in the burgeoning Indian ecommerce market. The company, which entered the Indian market with a B2B model in 2010, currently does negligible business here. However, with fresh funds, it is looking to re-enter through Snapdeal, a home-grown Internet business company founded by Kunal Bahl and Rohit Bansal. According to a media report, Snapdeal is in talks with Alibaba to raise more funds soon.
However, neither company nor their bankers could confirm the report. Jack Ma-promoted Alibaba is the largest online company in China but is getting aggressive with its global expansion to take on world leader Amazon in all those markets where the latter is present. Amazon entered India last year and has already made a commitment of $2 billion to take on leading players like 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 is that Alibaba would need an Indian partner to quickly gain local scale and Snapdeal would be 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.”
Kunal Bahl, in a recent interaction with BusinessLine , had said that Snapdeal has grown 700 per cent in FY14 as compared to FYI 13. The company has already achieved $1-billion dollar sales target and expects to close this year by more than doubling it.