Chinese Internet giant Alibaba is on the cusp of making its first investment in India, which will help it catch-up to its U.S. rival, Amazon, which has been operating there for two years.
India is particularly attractive because it represents the world’s second-most populous country, and is one of the fastest-growing international markets for e-commerce.
The Alibaba Group, in conjunction with ts financial services affiliate, is reportedly making the $575 million investment in India’s One97 Communications, an online payment and marketplace business, according to The Wall Street Journal, which quoted people familiar with the matter.
If the deal goes through, One97 would be valued at more than $2 billion. An Alibaba spokeswoman declined to comment. Alibaba, which recently went public raising $22 billion, has incredibly deep pockets, so its moves in India are worth watching closely.
The Wall Street Journal reports that the capital would go to One97’s Paytm unit, which offers an online payment service to customers and operates a mobile Internet marketplace. The marketplace has 15,000 merchants selling everything from electronics to clothing. Its payment services are used by several name-brand companies, including Uber, Airbnb and Expedia. It has roughly 20 million users.
The deal also includes a significant business arrangement, enabling Alibaba to get up and running in the country fast.
Paytm’s customers will be able to shop on Alibaba sites, using Paytm to pay, and Alibaba’s Chinese customers will be able to shop on Paytm’s marketplace, using Alibaba’s payment services to complete the transaction.
The capital and the swapping of marketplace services between the two will give Alibaba an immediate presence in India.
For almost two years, Amazon has been investing heavily in India. It first opened a third-party marketplace in 2013, and a year later, it announced plans to invest $2 billion in India. In a press release, announcing its intentions, Amazon CEO Jeff Bezos said, “At current scale and growth rates, India is on track to be our fastest country ever to a billion dollars in gross sales.”
Late last year, Amazon was rumored to be in acquisition talks with Jabong, an Indian online lifestyle retail site. The deal would be worth up to $1.2 billion, and would give Amazon a greater foothold in India.
Amazon and Alibaba are competing against a host of other sites, including eBay, but also Flipkart, the country’s largest online retailer, which was founded by former Amazon.com execs and recently raised $1 billion.