Chinese e-commerce firm Alibaba Group Holding Ltd (NYSE:BABA) is in talks with FOXCONN TECHNOLOGY (OTCMKTS:FXCOF) to start a joint investment worth $500 million in Snapdeal.com from India.
Sources revealed that Snapdeal could be valued at $5 billion once the deal takes root. Snapdeal brings merchants and buyers together where they can trade a wide range of items such as vehicles, houses, mobile phones and more. It is owned by a private company called Jasper Infotech. In 2014, the Indian startup received $1 billion from eBay Inc (NASDAQ:EBAY) that was in form of an investment. The firm was valued at $2 billion by Softbank Corp (USA) (OTCMKTS:SFTBF).
Another unnamed source revealed that Foxconn and Alibaba will engage in a combined 10% share in Snapdeal. The deal is still awaiting the approval of the regulatory board in India. Foxconn’s Chairman is said to have swayed Alibaba’s CEO Jack Ma into the joint venture citing that it would be more logical to invest jointly rather than separately. In some other meetings held earlier in the year, Alibaba was hesitant to make a small investment in Snapdeal.
The joint investment will quicken Alibaba’s presence in the country’s thriving electronic-commerce industry. More people in the country are embracing online shopping for products such as electronics, clothes and other commodities. This is the second investment opportunity that Alibaba has engaged in within the Indian market. In February, the company acquired 25% share ownership in an Indian firm known as One97 Communication Ltd.
Foxconn on the other had will be able to solidify its presence in India, where the local market has been exhibiting high demand for smartphones. India is the third largest market in terms of mobile shipments in the first quarter of 2015, the country’s smartphone shipment was 20 million units, registering a 21% increase compared to the first quarter in 2014.
Taxes for imported mobile devices in India recently doubled from 6% to 12.5%. Global manufacturers are thus considering options where they can produce the mobile phones locally.