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Why Alibaba Is Investing in Bigbasket

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Sep. 6 2017, Updated 8:07 a.m. ET

A $200 million investment for a stake in Bigbasket

Chinese e-commerce titan Alibaba (BABA) is in talks to invest in India’s (INDA) leading online grocer, Bigbasket, according to reports by Bloomberg and India’s Economic Times.

Alibaba and its Indian associate, Paytm, could invest $200 million in Bigbasket. The companies have been in talks for months. Bigbasket’s valuation is one of the issues being negotiated, and it’s likely the cause of the prolonged talks.

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Bigbasket sought a $1 billion valuation

Amazon (AMZN) also showed interest in investing in Bigbasket, but the companies disagreed over valuation (QQQ). Bigbasket sought a valuation of $1.0 billion, which Amazon didn’t accept.

In its previous fundraising, Bigbasket was valued at $450 million. Bigbasket is backed by investors such as Sands Capital and Abraaj Group of Dubai. A portion of the investment that Alibaba and Paytm are making in Bigbasket could be used to repurchase shares from existing investors.

Battle for India’s e-commerce market

Morgan Stanley (MS) is advertising Bigbasket’s parent company in terms of fundraising matters. Besides Alibaba and Paytm, other investors have shown interest in Bigbasket, implying growing investor appetite for India’s e-commerce assets.

Bigbasket’s competitors include Grofers India, which is backed by Sprint (S) parent SoftBank. Part of Bigbasket’s appeal is its express grocery delivery feature, which lets customers receive grocery deliveries in 60 minutes.

Grocery is one of the fastest-growing segments of India’s e-commerce industry. According to eMarketer, India’s retail e-commerce market will be worth $55.3 billion by 2018—up from $6.1 billion in 2014. The chart above illustrates this expected growth.

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