According to Wall Street Journal, Chinese e-commerce company Alibaba Group Holding Ltd. and Taiwan electronics manufacturing company Foxconn Technology Group, formally known as Hon Hai Precision Industry Co., are planning to jointly invest $500 million in one of India’s largest online company Snapdeal, which could bring the company a value of around $5 billion. They have decided to take a combined stake of 10%. But, this is yet to be approved by regulators in India.
Earlier, in March 2015, they were having talks to individually invest in Snapdeal but the talks closed down. It is said that Terry Gou, the chairman of Foxconn convinced Jack Ma, the Executive chairman of Alibaba to make a joint investment rather than an individual one because that would be more profitable.
Snapdeal connects sellers and buyers by offering everything from mobile phones to fashion to home products. Last year, it received an investment of nearly $1 billion from eBay and SoftBank that gave it a valuation of around $2 billion.
This is not going to be the first venture for Alibaba to invest in an Indian e-commerce company. It has already bought a 25% stake in Paytm for around $650 million in February. But, an investment in Snapdeal could speed up its expansion in India’s e-commerce market.
India is the world’s third-largest market for smartphone shipments after China and US. But, India has recently raised taxes on importing mobile phones to 12.5% from 6%. Hence, international handset makers are finding ways to manufacture devices locally in India. Foxconn is best known for assembling many of Apple’s iPhones and has been planning to invest in Indian e-commerce market and expand its manufacturing operations in India because wages in China are rising and the competition for Apple’s orders is strengthening.
Since the government regulations are obstructing their direct entry into India, they are taking steps to enter the country indirectly by investing in one of the largest Indian e-commerce company to make their way into the Indian market easily.