Alibaba-Snapdeal talks fell through on valuation

New Delhi, March 18

The much-touted deal between Chinese giant Alibaba with in Indian e-commerce firm Snapdeal for purchasing stake in the latter may have fallen apart due to high valuations being sought by the homegrown online marketplace.

The deal, which was being pegged at about USD 500-700 million, has hit a stumbling block due to a high valuation demanded by Snapdeal, sources said.

While both the companies declined to comment, sources said that Alibaba was valuing the Indian firm in the range of USD 4-5 billion against a valuation between USD 6-7 billion sought by Snapdeal.

The stake purchase in Snapdeal would have given Jack Ma-led Alibaba a stronger footing in the Indian market, which has one of the largest Internet population globally.

"Alibaba's talks with Snapdeal for acquiring a stake in the firm has fallen through,” said a person in the know of the developments said.

Alibaba has been expanding its presence in India, including through acquisitions.

Last month, Ant Financial Services — part of the Alibaba Group — said it would acquire 25 per cent stake in One97 Communications, the parent of mobile commerce firm Paytm.

A US-based investment banker said while private equity and venture firms were bvery interested in investing in e-commerce in India, they are adopting a cautious approach as they feel valuations are being "pumped up" to exorbitant levels.

"While acquiring stake in Snapdeal would have been a good deal for Alibaba, the high valuation could have forced it to back off," said the banker, who wished to remain anonymous as he was not authorised to speak to the media.

PE firms and angel investors are aggressively funding startups and Internet-led businesses in India, targeting higher returns in the years to come.

Snapdeal has, so far, raised more than USD one billion, including Japanese telecom giant Softbank's USD 627 million (about Rs 3,762 crore) and former Tata Group Chairman Ratan Tata's personal investment last year.

 Its larger rival Flipkart has also been receiving strong investor interest and had raised a USD 1 billion funding last year, the largest to date in the fledgling Indian e-commerce sector.

Also, another global rival, Amazon, has committed to invest USD 2 billion to bolster its business in India.

According to consultancy firm PwC, the e-commerce sector has grown by 34 per cent (CAGR) since 2009 to touch USD 16.4 billion (about Rs 1.01 lakh crore) in 2014 and is expected to touch USD 22 billion in 2015.

Research firm Technopak said the USD 2.3 billion e-tailing market in 2014 is expected to reach 3 per cent of Indian retail (USD 32 billion) by 2020. — PTI