Two Mega Deals in Offing: Amazon-Jabong & Alibaba-Snapdeal
Indian eCommerce industry is all set to witness some major fireworks as industry biggies: Amazon and Alibaba are in a major acquisition mode. As per reports coming in from various sources, Amazon is inching towards acquiring Jabong and Alibaba is watching Snapdeal very closely, and a deal may breakthrough anytime now.
If this Amazon decides to acquire Jabong (and seems chances are very high), Indian Ecommerce will witness it’s biggest acquisition till date. Sources are telling us that the first level of talks between Amazon and Jabong is now over, and management teams from both the portals are framing out the technicalities. As per insiders, this first level of talk had happened less than a week ago.
Although Indian FDI laws doesn’t permit investments in Jabong, hence it’s an inventory based ecommerce model, whereas Amazon India is basically a marketplace. Fashion is the biggest market as of now, and nobody wants to miss the first move.
This deal, if brokered successfully, will somehow imitate the Flipkart-Myntra acquisition, where the management from both the parties created some complex corporate structures to get through the Government approval.
Jabong reported gross merchandise value (GMV) of Rs 509.5 crore from 3.197 million orders during the January-June, 2014 period, and if their growth trajectory remains consistent, then by the end of March 31, 2015, they will report sales of Rs 1300-1500 crore. Valuation in Indian ecommerce industry is normally 3.5 times the total sales in a year; which makes Jabong worth around Rs 5000 crore or around $900 million.
Flipkart Myntra deal was pegged around $340 million, which is hailed as the biggest acquisition in the Indian ecommerce sector as of now. Amazon-Jabong acquisition is being talked about in the range of $1.1-$1.2 billion, which will overshadow the previous record by a good margin.
Both Amazon and Jabong has declined to comment on this development.
Alibaba – Snapdeal
Jack Ma, founder of Alibaba and China’s richest person with a net worth of $30 billion is in India along with a delegation of 99 top business men from his home town of Zhejiang. And as per reports coming in, he will meet several entrepreneurs from India, including Snapdeal’s founder Kunal Bahl.
Now, a mere meeting between two big shot entrepreneurs is not a news, but the fact that Kunal Bahl has openly stated their business model is very close to Alibaba’s business model makes this meeting pretty interesting.
Another fact: Softbank Internet from Japan is a common investor in both of these portals.
Earlier, Kunal Bahl had told to CNBC 18, “If Alibaba in China, which is the business we are most similar to, generates $5 billion EBITDA a year, there is a reason for it. They are not a retailer, they are a technology platform and that gives me confidence that in due course… we will see similar economics emerging out of our company as well,”
Although Alibaba has a presence in India, which they launched in 2010, it has negligible influence in the main B2B market, compared to China where they command 80% of the market!
Snapdeal, which has received personal investment from Ratan Tata, besides almost one billion dollar venture capital (till now, including Softbank’s recent $627M investment), may look very promising for Alibaba, which is now in a major expansion mode across Asia.
Certainly some exciting days for the Indian eCommerce, with some high level mergers and tie-ups in the offing. We will keep you updated as more details come in.