A potential acquisition of Snapdeal by Alibaba may have ended in a snap, due to a disagreement about valuation.
Sources have told The Financial Express that the pending deal, worth an estimated $500-700 million, has fallen apart because the Indian online marketplace Snapdeal values itself at $6 billion-$7 billion, while Chinese eCommerce giant Alibaba pegs Snapdeal in the range of $4 billion-$5 billion.
The end result of this disparity? “Alibaba’s talks with Snapdeal for acquiring a stake in the firm have broken down,” remarked a source to The Financial Express.
The Indian market represents one of the largest online populations in the world, giving Alibaba a good reason to want to continue expanding in that country — a goal in which an acquisition of Snapdeal certainly would have assisted.
But it appears that Alibaba chose to be cautious in this instance, something that is not uncommon as of late among potential investors in eCommerce in India. A U.S.-based investment banker told Financial Express that many believe that a lot of applicable valuations are being inflated to unreasonable levels.
Concluded the banker: “While acquiring stake in Snapdeal would have been a good deal for Alibaba, the high valuation could have forced it to back off.”
Even without the Alibaba deal, Snapdeal has still raised over $1 billion in funding, with portions coming from Japanese telecom firm Softbank as well as a personal investment on the part of former Tata Group Chairman Ratan Tata.
Financial Express notes, however, that Snapdeal’s larger competitor Flipkart is keeping pace, last year receiving $1 billion in funding of its own. Suffice to say, Snapdeal could have used that Alibaba investment to give it a boost in the Indian eCommerce marketplace.