- A deal is likely if the two sides can agree on valuation.
- The Indian company has raised over $1.76 billion in 12 funding rounds.
- India will become a serious battleground between Amazon and Alibaba
As talks over a potential buyout goes cold with Flipkart, Chinese e-commerce major Alibaba is close to buying out Snapdeal, setting up a new battlefront with global rival Amazon.
Three sources aware of the plans confirmed to FactorDaily that a deal between Alibaba and Snapdeal is likely if the two sides can agree on valuation.
A top executive familiar with Alibaba’s India strategy said: “The talks are sensitive. But the valuation doing the rounds is too high.” Rumour mills are abuzz with talks of a likely deal of this sort. The dominant narrative is that Snapdeal will be valued at over $2 billion.
The Indian company has raised over $1.76 billion in 12 funding rounds. A valuation less than that would mean investors will have to take a haircut on their bets.
On Twitter, anonymous handles “CorporateKumar_” and “Uni_Con1” were the first to tweet about the deal out earlier on Thursday.
Snapdeal’s biggest investor SoftBank is run by Japanese billionaire Masayoshi Son, who is slated to be in India this week. Son and Alibaba’s founder Jack Ma are close associates and friends. Son was among the first investors in Alibaba and the duo have backed companies together.
If the deal goes through, Alibaba which already owns over 40% in Indian payments company Paytm, will get a marketplace company to consolidate its position in India’s e-commerce business. It is also scouting for a logistics play, to fit into its iron triangle strategy in India’s $600 billion retail market.
Paytm is spinning off its marketplace business to a separate entity to make way for Alibaba’s direct entry into the country, The Economic times reported in October. It is likely to be merged with the new entity Alibaba will create after acquiring Snapdeal. “The talks with Flipkart are not going anywhere which is why Snapdeal has come into the picture,” a second source said, also asking to stay anonymous.
If this acquisition goes through, India will become a serious battleground between Amazon and Alibaba, the largest e-commerce companies in the world. Amazon has plans to plough in $5 billion into the Indian market and Alibaba has been quietly building up its presence in the country. Alibaba poached HR executive Priya Cherian from Flipkart to build its team in India. Guru Gowrappan, who is global managing director at Alibaba is the man behind Alibaba’s efforts at globalising the company.
Update 1 (6.22 PM IST, 2 December 2016): Kunal Bahl had tweeted earlier: Rumour rumour on the wall, which troll did you call. You said sold, they said bought, but whoever listened to you didn’t get diddly squat.
Update 2 (6.22 PM IST, 2 December 2016): Responding to a conversation on Twitter on talks about the deal reported by FactorDaily, Bahl said: And given the person who texted me is a friend, I responded that this news is garbage. Though there wouldn’t be a story then. Oh well ?.
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Disclosure: FactorDaily is owned by SourceCode Media, which counts Accel Partners, Blume Ventures and Vijay Shekhar Sharma among its investors. Accel Partners is an early investor in Flipkart. Vijay Shekhar Sharma is the founder of Paytm. None of FactorDaily’s investors have any influence on its reporting about India’s technology and startup ecosystem.