Aditi Shrivastava &
Madhav Chanchani, The Economic
Bengaluru, 14 June 2016
Alibaba Group Holdings is
looking to buy, or invest in, an Indian logistics company specialising
in deliveries for online retail players, and towards this end has held
talks with Delhivery and Xpressbees Logistics, according to two people
aware of the development.
The Chinese company is also chalking out a plan to get Paytm to spin
off its marketplace business and plans to top it up with more capital,
said a third source. Alibaba and its affiliate Ant Financial together
own about a 40% stake in the Noida-based company.
These moves are part of an effort by Alibaba to build what founder Jack
Ma calls the "iron triangle" of businesses in ecommerce, payments and
logistics, and position it to challenge dominant incumbents Flipkart
Paytm and Xpressbees, which is based in Pune, declined to comment.
Sahil Barua, the CEO of Gurgaon-based Delhivery, did not reply to an
email seeking comment.
Times Internet, a part of the Times Group which publishes this
newspaper, is an investor in Delhivery along with Tiger Global
Management and Nexus Venture Partners. In response to questions from
ET, Alibaba said in a statement that it sees "tremendous opportunities"
in India. "We are absolutely committed to developing in this market for
the long term," it said.
Alibaba is likely to buy a majority or a significant minority stake in
a logistics company, which will give it a major say in operations, said
one of the sources cited above. The investment will be decided in 4-6
months, once Alibaba is ready to launch its horizontal marketplace
platform in India.
Both Delhivery and XpressBees already work
with Paytm's marketplace as third-party logistics and eKYC partners.
control over logistics is important because infrastructure comprising
roads, storage and vehicular assets, as well as skills, regulations and
systems are relatively under-developed in India, said Devangshu Dutta,
CEO of retail consultancy Third Eyesight.
"Major players such as Amazon, Alibaba, Flipkart have to take direct or
indirect control to ensure that their logistics capabilities evolve
ahead of their own business growth curve," he said.
Top executives from Delhivery and XpressBees have
met the team which Alibaba has set up for the India entry. This group
is led by Alibaba's Global Managing Director K Guru Gowrappan and
Bharati Balakrishnan, the first top executive hired by Alibaba to build
a consumer-facing business in India. Alibaba executives currently work
out of Paytm's headquarters.
Delhivery was estimated to be valued at Rs 2,000 crore during its last
funding round. SAIF Partners and IDG Ventures are among the investors
in Xpressbees, whose valuation is not known.
"They are putting their strategy in place. Fundamentally, they will buy
and start with Paytm's online retail business, because a deal with
Flipkart is not happening right now as they feel it is very expensive.
They will get a logistics partner to build a network like Amazon, which
is very critical," said a source briefed about Alibaba's plan.
Besides owning a stake in Paytm, Alibaba owns around 5% of Delhi-based
online marketplace Snapdeal. It held investment talks with Flipkart,
but the two companies were not able to reach an agreement on valuation
and terms. Alibaba and Paytm are working out the contours of the
corporate structure of the marketplace entity, where 100% foreign
direct investment is allowed as per regulations announced by the
government in March.
"All payments will be moved to the payments bank and ecommerce will be
a separate entity which Alibaba will invest in again. We will see some
announcements over the next three to six months," said a person briefed
about the plan. As India becomes a crucial battleground for the world's
two largest online retailers, they are deploying contrasting strategies
in an ecommerce market that Internet and Mobile Association of India
estimates will be worth Rs 2.1 lakh crore by December 2016. While
Alibaba has made strategic investments, Amazon India is growing
Amazon ended 2016 with net sales of $107 billion. Alibaba closed its
financial year in March 2016 with revenue of $15.7 billion.
Winning in India has become critical for Amazon, after it lost out in
China to Alibaba. Last week, Amazon founder Jeff Bezos announced that
his company will invest another $3 billion in India, taking the total
commitment to around $5 billion, putting the spotlight on Alibaba's
Alibaba is also entering India at a time when funding options for local
players have dried up, and sales growth is flattening as online
retailers pull back on discounts. This gives it an opportunity to
cherry-pick assets in the country. India is also important for
Alibaba's push to globalise its customer base, as it looks to get half
of its revenue from overseas by 2020 as compared 20%. In April, Alibaba
acquired a majority stake in Southeast Asian online retailer Lazada for
$1 billion when it was reportedly running out of money.
(Published in The