Snapdeal may secure funds from Alibaba and Foxconn investments. Both companies are investing together in the company. The deal may be in the range of $500 million. Alibaba Group Holding ltd is China’s largest e-commerce company and Foxconn Technology Group is iPhone assembler in Taiwan.
Alibaba and Foxconn may probably take 10% stake in Snapdeal subject to regulatory clearance. Snapdeal’s valuation might rise to $5 billion. For Alibaba it is second time they are in talks with Snapdeal after it was stalled last year. However for Snapdeal if the deal works out, it will be shot in the arm. The company is competing with bigger rivals Flipkart and Amazon in the cost conscious and intensely competitive Indian market.
For Alibaba want to be part of India’s e-commerce market, tipped to be one of the largest after China and as more and more Indians are going to shop online that may be apparel to groceries and electronics. The company is investing highly in India, recently it took 25% stake in PayTM – India’s leading online payment business through its affiliate Ant Financial.
At the same time Snapdeal is lapping up companies every month. From the start of the year they have acquired Smartprix.com – a product comparison site in January, in February they took over Execlusively.in which is a luxury fashion products discovery site. Snapdeal acquired 20% stake in Gojavas.com in March 2015 and acquired majority stake in RupeePower – a company that sells financial products to customers.
Snapdeal acquired mobile payments company FreeCharge.com in April 2015. Most of the traffic Snapdeal is receiving from mobile; they took over Martmobi to provide better mobile technology solutions in May 2015. Few days’ back Snapdeal acquired Letsgomo for an undisclosed amount.
To fuel its acquisition Snapdeal requires funds. Snapdeal has bagged several rounds of funding from investors like Softbank, Ratan Tata – Chairman Emeritus of Tata Sons, Premjiinvest – investment arm of Wipro Ltd, BlackRock are prominent among them.
For Foxconn Technology it will be game changer, in terms of forward integration they will have a ready platform to market their products. Only they need to backward integration in terms of setting up of manufacturing facilities in India. They are planning to start manufacturing facility for iPhones in India by 2020. The company is planning to start 10-12 plants in India.
In India smartphones market is growing at scorching pace of 21% this year. Most of the buyers would like to buy them through online. Online retail sales segment is growing leaps and bounds. Estimates for 2020 are pointing towards to a juicier figure of $60 billion from $4.47 billion last year. Factors like higher penetration of smartphones which gave rise to mobile commerce.
Several small players are competing for funding with leading PE investors. PE Investors are looking for profitability quotient on the investment they have made. At the same time investors too looking to spread investment risk in different startups which will minimise the risk involved.