Alibaba stock fall could have negative impact on Indian ecommerce

Leading Chinese ecommerce marketplace Alibaba’s stock fall is predicted to influence the Indian ecommerce market, fear industry experts. Alibaba went public in September 2014, but its stock prices tumbled down shortly after. Their experience with Alibaba’s fate has made Venture Capital firms and major investing companies wary of repeating the mistake in the Indian context.

Investors to exercise due diligence before taking the plunge

Investors with interests in major Indian ecommerce companies are maintaining that they will tread with caution when they invest. Everybody is doing their homework, and checking on companies’ functioning, and corporate governance before investing. According to an investor in Flipkart, “In India, late-stage valuations are already showing signs of plateauing and it’s clear they will not increase with the ease they did in the past year.

Now, when new investors are evaluating Indian companies, they are doing more due diligence and asking about structures and corporate governance because they’re seeing the scrutiny Alibaba is being subjected to. These kinds of questions weren’t asked with such seriousness earlier.”

Why did Alibaba’s stock value fall post IPO?

Ever since the company announced its IPO, its fortunes have dwindled. Alibaba’s stock fell almost immediately, and unfortunately continues to fall. The primary reason cited was the sale of fake goods and illegal business.

Apart from that, some factors that could have caused the drop in stock is listed in this article. The increase in sale of fake and pirated goods, rising competition, and an over estimation of the company’s performance have all contributed to the decline in stock value.

The Indian connection

Three leading global venture capital firms, Tiger Global, SoftBank, Temasek Holdings, and DST, who have put their money in Indian companies, had also invested in Alibaba. With the growth of the Indian ecommerce industry appearing to have hit a block, the investors’ fears have only increased.

While the investments could be affected, it might just be for the better, say experts. Amit Anand, managing partner of Singapore based Jungle Ventures feels, “Such a correction is healthy and it will eventually build confidence among investors. While some fly-by-night investors will exit or avoid India because of the Alibaba impact, people who are serious about investing in India will continue to put in money because of the massive potential.”

So all hope is not lost for Indian ecommerce; investors will continue to invest. Hopefully this should keep companies on their toes to maintain a clean slate with respect to their corporate practices.