In first signs of consolidation in India’s ballooning, burgeoning (or whatever else you could possibly call it) ecommerce segment, Flipkart is now looking towards Alibaba (Snapdeal’s and paytm’s backer) to fund its operations 12-18 months from today — a time when its current funding will burn down completely.
In a LiveMint report, which continues to remain unconfirmed by either of the parties involved, Flipkart has reportedly approached Alibaba for getting money to fund its deep-discounted ecommerce model. And while Flipkart has enough cash to last for 12-18 months more, the company is now on the lookout for heavyweight investors to pump in the kind of cash it needs to sustain until a possible IPO.
There’s just one glitch — a common one with every investor in trying money raising times like these — valuations.
Flipkart, post its last mega raise, is valued close to $15 Billion — a number which Alibaba is not willing to accept. The Chinese ecommerce major has asked India’s ecommerce poster boy to provide a discount of sorts on that figure, if it wants Jack Ma to sign that much needed cheque.
In fact, the report also says, that while Alibaba is already an investor in Snapdeal, it is asking for the exact same commitment from India’s No.2 ecommerce company as well — a discount on its current $5 Billion+ valuation. Alibaba already owns a significant stake in Paytm, which post its recent round and turning its payment businesses profitable, isn’t really in dire need of cash right now.
That was the news part, lets get to that going-to-be-interesting analysis part.
Now Indian ecommerce firms have matured into huge companies. The problem however is, the fact that they still run on investor money, and look to raise a billion dollar round every alternate year. However, considering that India’s peak investment time looks all but gone right now,and firms like Flipkart and Snapdeal need more than just a few hundred million, there are not too many takers for India’s top e-commerce firms at their current valuations. This has thus prompted both Flipkart and Snapdeal to approach Alibaba Group for cash.
Flipkart’s valuation — which currently stands at a staggering $15 billion, has reached that figuring by soaring five times since May 2014 — a time when it had raised $210 million from DST Global, Tiger Global Management and others. Snapdeal’s valuation on the other hand, has increased more than 6 times since it raised $100 million that very same time. Since then, Flipkart has raised $2.4 billion while Snapdeal has raised more than $1.3 billion — and both are still looking for massive cash infusion to stay afloat.
If Flipkart does budge out on valuations, this could be the first signs of a major, and perhaps much-needed consolidation in the Indian ecommerce space. And for Alibaba, well the company would have a gargantuan presence in two of the world’s most populous and fastest internet growing countries in the world — China and India. And while the former is Alibaba’s home turf, the company is already controlling a majority of Indian market without even requiring to establish a real presence in here.
Softbank, which is Alibaba’s largest investor and also a significant stake holder in Snapdeal, is obviously in for the deal.
As for cash, Alibaba had a whopping cash and cash equivalents of $17 billion, according to the company’s quarterly earnings report released few days back.