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After talks with Amazon fail, Flipkart courts Alibaba

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Amazon was in talks to buy as recently as last year. According to a report in The Economic Times, Amazon had engaged in the last quarter of 2015, but talks broke down on the matter of valuation.

Retail Mantra: Look to customers, not investors
Startups need to search out new areas to service customer needs if they want to have a shot at hyper growth and hyper valuations while traditional retailers in India, will need to focus on the existing biggies – Flipkart, Snapdeal and Amazon

Amazon – said unnamed sources cited in The Economic Times report – offered $8 billion for Flipkart, $5 billion for Flipkart’s e-commerce business and $3 billion for the logistics business.

The talks went cold at the preliminary stage because Flipkart’s last valuation was $15.2 billion, almost double of Amazon’s offer.

Recently, a mutual fund managed by Morgan Stanley however slashed Flipkart’s valuation to somewhere close to $11 billion, down almost 27 per cent.

Meanwhile, Flipkart CEO Binny Bansal rubbished all rumours saying that his company was in the e-commerce for the long haul. He also said in a statement that the Bengaluru-based startup would raise money only at the right valuation.

The speculation over Flipkart’s talks with Amazon come at a time when funding to online retail organizations in India is in the midst of drying up. It also brings into focus, the ability of Indian Internet organizations to go all the way independently, changing the entire online retail scenario in the country.

In the meanwhile, there are reports that Flipkart has renewed talks with recently to raise a fresh round of funding. If acquires a stake in Flipkart, and then merges it with Paytm (in which is the largest investor) and Snapdeal (backed by Japan’s SoftBank) in India, Amazon will find itself in a tough spot.

According to a report in The Economic Times: While Flipkart is market leader, Amazon has access to cash from its balance sheet, and founder Jeff Bezos has promised to invest $2 billion in India. Alibaba is an investor in both Paytm and Snapdeal, making India a battleground for two of the world’s largest online retailers.

India’s online retailing market, which Goldman Sachs projects will expand to $69 billion in 2020 from $23 billion in 2016, has become the biggest playground for world’s largest ecommerce companies.