Twist in India's e-commerce story: Ratan Tata likely to invest in Snapdeal

There's never a dull day in the Indian e-commerce sector. After Flipkart raised $1 billion in funding last week, and a day later, Amazon said it would spend a whopping $2 billion on its India operations, news has emerged about the pair's rival, Snapdeal.

The Times of India reports that Snapdeal is likely to get a capital infusion from Ratan Tata, arguably one of India's most successful industrialists. According to sources quoted in the article, Tata could buy out early stage investors through a secondary sale, though there is no confirmation of the stake he could acquire. The article further states that Tata visited Snapdeal's Delhi offices last month and addressed employees.

The news comes just days after VCCirclereported that Snapdeal is looking to raise $300 million in PE funding. Sources told VCCircle that the company would have a few more fund raising rounds before its IPO. In 2014 alone, Snapdeal has raised over $230 million. Given the aggressive strategies adopted by Flipkart and Amazon, the news of Tata's possible investment in Snapdeal has come at just the right time for Snapdeal.

In an earlier reportinThe Economic Times,Snapdeal co-founder Kunal Bahl was quoted as saying in that he was being pursued by internal and external investors "aggressively". Taking a jab at rival Flipkart's recent fund raising activities, Bahl told ET, "Even in six months or 12 months, how do you theoretically spend hundreds of millions of dollars? I don't know how to spend that money in our business model. How much TV advertising can you do, how many people can you hire?" He added thata certain company's valuation (Flipkart's was pegged at about $7 billion after the fund raising round) was 'ridiculously high'.

Snapdeal's existing investors included Nexus Venture Partners, BlackRock,Singapore's Temasek and Bessemer Venture Partners among others.

Tata's potential move signals the arrival of e-commerce in India, with several business houses lining up online retail ventures.

Tata won't be the first Indian business tycoon to want a bite of the booming Indian e-commerce sector. Wipro's Azim Premji led a consortium of investors that pumped in $100 million into Snapdeal earlier this year. Premji had also invested in fashion portal Myntra, which was recently acquired by Flipkart.

Infosys' Narayana Murthy and Amazon joined hands to provide back-end support to get Indian companies online. Murthy'sCatamaran Ventures's partnership with Amazon Asia will target small- and medium-sized firms.

Online sales of retail goods totaled $2 billion in 2013, according to research firm Forrester. Technopak forecasts sales are expected to reach $76 billion by 2021.

With inputs from agencies

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Updated Date: Dec 21, 2014 11:37:03 IST