Alibaba and Softbank investing competitively

As SoftBank is aggressively increasing investments in India, Alibaba is also geared up to tap the investment potential from the Indian ecommerce market.  However, this becomes an awkward situation for Alibaba because Softbank is one of its biggest investors. It is no deterrent for Alibaba to  invest in India, though. This is at a time when India’s consumer internet market — estimated to grow to $43 billion by 2019, with online retail contributing about $23 billion according to Nomura — is selling like hot cakes, with every big global investor wanting a share of it.

Stepping no toes

Alibaba and Softbank are taking care to ensure that they do not end up rivalling each other. According to reliable sources, both the corporate giants want to have stakes in the lucrative ecommerce market in India. However, they are in talks with each other to ensure that they make the right kinds of investments and walk in unison, instead of ending up as stark competitors. It is believed that executives from both Alibaba and Softbank have had meetings with merchant bankers to discuss potential investment and acquisition opportunities India.

“The meetings were to discuss potential targets for both. Things are at a preliminary stage,” explained a source that was present at the meeting.

Softbank is the largest investor in Snapdeal, which is the third biggest leader of online retail in India. In October, it invested $627 million in the company. Softbank is also the largest investor of Alibaba, which is however only engaged in business-to-business ecommerce in India. In November, Jack Ma, Alibaba’s founder and chairman visited India as part of a Chinese business delegation, where he indicated that his company would be a bigger stakeholder in India’s online retail industry.

Waiting and watching

Industry insiders have some interesting insights to share. “Alibaba is very strategic. They won’t jump the gun and start acquiring companies in India. Right now, they are testing the waters through SoftBank and without showing any direct involvement they (Alibaba) can get direct feel of the market,” said one source. The partnership with Alibaba will also allow SoftBank to outrun South African rival Naspers and global venture capital and hedge fund Tiger Global, which are one of the primary backers of Bangalore-based Flipkart.

Looks like both Alibaba and Softbank are applying the belief, ‘if you can’t beat your enemy, befriend him’. It would be interesting to see how their investments play out in the future. In either case, there is one clear winner that emerges: the online retail industry in India.