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Business deals

Alibaba steps on investment pedal in India, eyeing expanding online retail

Chinese e-commerce firm to pump in more money into Zomato

Alibaba is said to be scouting for a partner in India.    © Reuters

MUMBAI (NewsRise) -- Alibaba Group Holding, China's largest e-commerce company, is stepping up investments in India as it seeks to grab a larger share of the online spending in the south Asian nation where Amazon.com and Walmart are also pouring in billions of dollars.

Zomato, an online food delivery company controlled by Info Edge India, is the latest to win funds from Alibaba. Alipay Singapore Holding, a unit of Alibaba, along with its affiliates, agreed to infuse about $210 million in the company.

Following the agreement, Info Edge's shareholding in Zomato will reduce to 27% from almost 31% at the end of March, the Indian company said in a statement to stock exchanges.

Alibaba's second consecutive investment in Zomato since the beginning of this year reportedly pegs the startup's valuation at $2 billion, and underscores the Chinese e-commerce major's interest in the Indian online market. In February, Zomato received $150 million from the payment unit of Alibaba in a deal that valued the company at more than $1 billion.

According to a report by Boston Consulting Group and Google in February, online consumer spending in India is likely to expand more than two-fold to around $100 billion by 2020, led by the growth in e-commerce, travel, financial services, and digital media.

Alibaba is already the largest investor in Paytm, India's largest digital payments service. Alibaba's Ant Financial unit is also the largest shareholder in Paytm. In February, Alibaba also invested in online grocery retailer Big Basket, becoming the company's largest shareholder.

Amid surging funding in the burgeoning e-commerce sector, global internet companies are now shifting focus to the country's brick-and-mortar retailers in a bid for complementing their investments and quicker returns.

"The next six to 12 months are going to be very crucial for Alibaba," said Satish Meena, an analyst at Forrester Research. "With the entry of Walmart, we expect Alibaba to move very quickly to grab its spot in the Indian online retail space."

Earlier this year, Walmart invested $16 billion for a controlling stake in Flipkart Internet, India's largest e-commerce company. This was followed by Amazon.com's joint investment with Samara Capital in Indian supermarket chain More, backed by conglomerate Aditya Birla Group, in September.

The deal, with a reported enterprise value of $580 million, gives Amazon access to More's 540 stores spread across India's smaller towns and cities.

Alibaba, which has already made a splash in China with its technologically advanced Hema supermarket chain that houses restaurants where robotic devices replace wait staff, is reportedly scouting for a partner in India.

According to media reports, Alibaba is holding talks with RP Sanjiv Goenka Group to pick up a 10-15% stake in Spencer's Retail arm. A spokesman for Alibaba didn't immediately respond to questions.

"Alibaba is replicating in India a business model that straddles different sectors, a model that has worked well for it in China and other Southeast Asian markets," Forrester's Meena said.

--Dhanya Ann Thoppil

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