Alibaba Exploring Opportunities To Directly Enter Indian Market

Alibaba is the new Wal-Mart for Indian retailers as it wants to directly enter the Indian e-commerce market.

Alibaba Group Holding is looking to improve its international market presence in the coming times. It already dominates more than 80% of the domestic market share and is a dominant force irrespective of the competitor. Now it wants to build its business outside China and aim for global domination. The company’s main target is to expand in the Indian e-commerce market, which is currently the fastest evolving market in the world. On many previous occasions, it mentioned to not directly enter the Indian market.

Recent news indicates that Alibaba indeed is ready to directly enter the market and it seems to be the similar case that happened in Wal-Mart a decade ago. Alibaba Group has brought the Wal-Mart ghost for the Indian retailers. In April 2006, the US retailer ‘Wal-Mart’ hinted to enter the Indian retail market, which made most headlines during that time. On top of it, it threatened other retailers. Exactly seven months later of the announcement, Wal-Mart showed its intention to enter the Indian market but through a joint venture with the Bharti group.

During that time, Wal-Mart wanted to enter the wholesale domain. The direct entry was stopped by the foreign investment rules of the Indian market hence it had to work its way to enter through different means. Its entry set off the alarms in the retail sector as the entrance of a multinational retailer could mean sidelining the local established online or brick and mortar business.

Now the fear factor is similar in 2016, as Alibaba has provided a slight hint of directly entering the Indian e-commerce market. As it announced, panic buttons were pressed by the local businesses as the Chinese tech giant explores opportunities for directly entering. However, Wal-Mart has still not managed to enter as a multi brand retail or direct selling. The executives and the analysts who know the Indian e-commerce market agree on the fact that Alibaba is the new Wal-Mart for Indian retailers.

Alibaba is pitched against Wal-Mart in international market as well like never before. It recently announced that it had surpassed the Gross Merchandize Volume (GMV), which is the total value of goods sold on the online marketplace which Wal-Mart previously set in a fiscal year. Furthermore, the company also posted more sales than Wal-Mart and broke records. It is yet to announce its fourth quarter results in the coming time.

Analysts believe that Wal-Mart posted revenues of $482 billion in 2015 whereas Alibaba has done enough to touch revenues of $490 billion at the end of its fiscal year.

The executive chairman of Flipkart, Sunil Bansal, and the CEO of Snapdeal Kunal Bahl took this matter to Twitter. Mr. Bansal tweeted, “Alibaba deciding to start operations directly shows how badly their Indian investments have done so far.”

On this, Bahl replied, “Didn't Morgan Stanley just flushes $5 billion worth market cap in Flipkart down the toilet? Focus on your business, not commentary.” 

Flipkart Declines Speculation Of Negotiation With Alibaba

Flipkart has declined the rumors that it is in talks with Alibaba or any other investor over stake sale.

The officials at Flipkart have come forward to declare that the biggest Indian e-commerce startup is not in negotiations with the Chinese e-commerce giant, Alibaba Group Holding, or any other investor for a possible stake sale. There were speculations that started at the beginning of this year when Alibaba began to expand its global footprints in the international regions, such as India. The online retailer currently holds stake in two e-commerce startups in the region, which include Snapdeal and PayTM.

Alibaba Group already made it clear before it had plans to invest in Flipkart that it will only do if the startup lowers its valuation to decrease share price. Various sources suggested that both parties initiated the talks for a stake sale earlier this year. According to the statement of Flipkart, it might be possible that the negotiations have ended due to the disagreements on the valuation and price. The Chinese e-commerce leader wanted to have a mutual agreement with Flipkart over this but it seems like the Indian startup is not willing to lower the valuation.

The spokesperson of Alibaba was approached for a comment but he refused to provide any comment on such market speculation. On the other hand, Flipkart spokesperson said in a statement, “We are not in talks with anyone to raise funds. We are well capitalized for the long term. We believe in raising funds when they are available and always at the right valuation.”

According to sources, Alibaba Group might have lost interest in investing in Flipkart due to disagreements over valuation terms. It wanted to buy stakes in the firm at a price of last year’s valuation. Morgan Stanley, a US based funding house, is a well-known investor in the Indian company. Morgan Stanley recently decreased Flipkart valuation from $15 billion to $11 billion as the e-commerce startup failed to meet the earnings and revenues expectations for last year.

Flipkart last received a massive funding of $700 million from Qatar Investment Authority, Tiger Global Management, and other investors last ear. It was in talks with Alibaba and other reputed investors since late last year to raise up to $1 billion in funding.

The Chinese e-commerce leader is known in India for investing in Indian company’s rivals, Snapdeal and PayTM. It is making deals and acquisitions in the area in order to increase its India exposure and improve its international market presence. Alibaba said that it will not expand its operations or business in the foreign regions until it makes name internationally.