According to reports by Recode, Jack Ma’s brainchild Alibaba Group Holding Limited BABA may give up on its plans to invest in Indian online marketplace, Snapdeal.
What’s behind this Loss of Interest?
India is one of the most sought after e-commerce markets but still Alibaba has, for now, scrapped its plans to invest in one of the biggest online shopping startups in the country.
According to Recode, which cites a person familiar with the matter, Alibaba has held discussions with Snapdeal about a likely investment.
Snapdeal competes with the likes of Flipkart.com and Amazon.com AMZN and media reports stated that it was looking for $1 billion in its latest funding round to fuel growth.
However, according to the source cited by Recode, Alibaba and Snapdeal's talks, did not involve a deal close to the $1 billion number that Snapdeal was reportedly looking for. The lofty valuation appears to be turning Alibaba away.
Representatives of both companies declined to comment.
Why is India so important for Alibaba?
In 2014, India benefited from an e-commerce investment boom as important Silicon Valley-based funds began pouring fresh funds into fast-growing domestic start-ups, such as e-retailer Flipkart and Snapdeal at multibillion-dollar valuations.
India, with a big population of 1.2 billion, has encouraging demographics and the economy is also improving as a result of the investment friendly approach of the new government.
The entry of Alibaba is expected to increase the excitement over the sector’s prospects. It will also put the Chinese e-commerce giant up against U.S.-based Amazon.com which invested $2 billion in its local subsidiary last year.
The fact that the Indian e-commerce market is still at a nascent stage is a huge advantage for big experienced players like Amazon and Alibaba.
Only last year, Kunal Bahl led Snapdeal received a huge investment from eBay Inc. EBAY. It went on to raise more than $600 million from Japanese giant SoftBank.
To Conclude
While its competitors are all jumping into the action, Alibaba appears to be weighing its options. Alibaba might just have the time to reconsider its strategies.
Alibaba shouldn’t however take too much time as getting in early will enable the company to take share, thus generating higher revenues and profits.
Alibaba has a Zacks Rank #3 (Hold).
Investors can also consider Apple Inc. AAPL as it holds a Zacks Rank #2 (Buy).
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