Alibaba Joins With SoftBank To Enter India

Alibaba and SoftBank are currently discussing their breakthrough into the India’s internet market. Both companies are devoted to securing a slice of the market together, rather than as rivals.

According to two people who had direct knowledge of the developments, executives from Japanese conglomerate and the Chinese e-commerce group have held several meetings with bankers to discuss possible investment and acquisition potentials in the country. According to the Economic Times, one of the sources with knowledge of the talks had this to say to the press.

“The meetings were to discuss potential targets for both. Things are at a preliminary stage.”

One of the possible scenarios involves Alibaba participating in follow-on funding for Softbank’s companies in India, such as the famous online market Snapdeal, online real estate sales site Housing.com, and taxi service Olacabs. Alibaba could also take over a majority of the ventures of the Masayoshi Son-led group, which is expected to invest up to $10 billion in India.

However, the companies have stayed silent. There were no comments from Alibaba representatives, and SoftBank didn’t respond to emailed questions sent by ET.

The importance of these discussions lies in the fact that SoftBank is the biggest investor in Snapdeal, one of the top three online marketplaces in India, as well as Alibaba. While SoftBank is expanding its investments in India, Alibaba is eager to get a slice of the market, and not having to watch itself from the trade rivalry just because its main investor is the Japanese conglomerate.

According to Reuters, India has the third-largest internet user base in the world, which is somewhat underserved by online marketplaces. Estimated growth by 2019 should exceed $43 billion, indicating that the India’s market is on fire.

“That situation means India has, with better, faster and cheaper Internet access, a big growth potential,” says SoftBank vice chairman Nikesh Arora, who was a part of $627 million deal made with Snapdeal.

Snapdeal has become the fastest-growing online retailer in India, with over 25 million registered users and more than 50,000 active sellers. Experts compare Snapdeal with China’s Alibaba, which recently scored a record IPO. The current estimated value of Alibaba is more than $240 billion.

Alibaba, counting Softbank as its biggest investor, has so far only engaged in online business-to-business trade in India. In November, Jack Ma, Alibaba’s founder and chairman, visited India. He gave clear indications that his company is ready to enter the India’s online retail market.

“Alibaba is very strategic. They won’t jump the gun and start acquiring companies in India. Right now, they are testing the waters through SoftBank and without showing any direct involvement they (Alibaba) can get direct feel of the market,” said one source.

“It is a very silent, yet profitable, arrangement for both parties,” a second source present at the meeting said.