Daily Management Review

Global technology Firms Flock to Invest in Indian E-commerce market, Snapdeal the latest beneficiary


Global technology Firms Flock to Invest in Indian E-commerce market, Snapdeal the latest beneficiary
Stamping a nod on the growth of the online retail market in India, global giants in online retail and allied industries and banks are queuing up to finance Indian online retail companies.

In one such reported deal struck by India’s leading online retail platform, Snapdeal, has finalized a $500 million investment agreement from investors that include China’s Alibaba Group, Japan’s SoftBank and Taiwan’s device maker Foxconn which is the trading name of Hon Hai Precision Industry Co Ltd.  

These are three of Asia's as well as the world's biggest technology companies. The deal is expected to be finalized anywhere between a few days or weeks.

Even as the increase in the valuation of the Indian retail company is not clear, the company had been engaged in talks with Alibaba for a reported valuation of $5 billion. However those talks seemed to have fallen through.

This Snapdeal investment, if materialized, will result in the Chinese retail giant Alibaba’s first direct investment into India’s e-commerce sector. Earlier the company had invested in digital payments firm, Paytm, through its affiliate, Ant Financial.

Snapdeal runs an internet platform that connects small businesses with customers in an online marketplace.

The growth of the Indian e-commerce segment has seen the coming of hordes of foreign investors to the market who have turned in hundreds of millions of dollars into the leading e-commerce firms.

The rise in the usage of smartphones, the increasing accessibility of the internet for the common users and a young country with 1.27 billion people market has made the Indian e-commerce market a lucrative proposition for global firms. The e-commerce market has seen significant growth in India in the last few years with a number of domestic companies making it big in the segments ranging from retail to e-music to e-books.

According to the Kunal Bahl, the founder of Snapdeal, the potential of the Indian e-commerce market is such that it could grow eight-folds to reach $250 billion within a decade which would be more than the Chinese e-commerce industry.

However in March this year, Snapdeal Chief Executive Kunal Bahl said that the company was not looking to raise money from the market immediately as it was comfortably placed in terms of capitalization for the next couple of years. 

In recent months, Flipkart, India’s largest online retailer had inked a $ 700 million investment deal with Tiger Global. The two deals conclusively prove that international investors are outdoing each other in plowing vast amounts of capital into India’s leading online retailers. Flipkart is one of the biggest rivals of Snapdeal.

Amazon India, the Indian wing of Amazon.com had been reported to have got a $5 billion investment from the parent company to spruce its activities in the Indian e-commerce market.

BlackRock and eBay had invested over $1 billion in Snapdeal earlier while SoftBank poured in $627 million into the online retail platform last year. The gross merchandise volume or the GMV- the value of goods sold on its site, of the company was reported to have grown by 301% for the year ending in March 2015 to reach a total of $2 billion.

(Source: www.forbes.com, www.reuters.com & www.businessinsider.com)