• Snapdeal has received immense backing from Alibaba and Foxconn.

Snapdeal has received immense backing from Alibaba and Foxconn. (Photo : www.yourstory.com)

Chinese e-commerce titan Alibaba Group Holding Ltd. is currently in talks with iPhone assembler Foxconn Technology Group on plans to jointly invest about $500 million in Snapdeal.com, which will raise the potential value of the five-year-old Indian e-commerce startup at around $5 billion.

Snapdeal, owned by Jasper Infotech Pvt., is an online company that sells everything--from mobile phones to cars to houses--and connects merchants and buyers. The company received an investment of nearly $1 billion from eBay Inc. last year, and SoftBank, a Japanese telecommunications giant, gave it a valuation of $2 billion.

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Though still needing regulatory approval in India, Alibaba and Foxconn had decided to take a combined 10-percent stake in Snapdeal, a source told the Wall Street Journal.

According to the source, Foxconn Chairman Terry Gou was able to convince Alibaba Executive Chairman Jack Ma that it would be more sensible to invest together rather than separately.

Earlier this year, Alibaba and Snapdeal.com held separate talks, but it was stalled because Alibaba showed no interest in making a small stake investment in Snapdeal.

Alibaba believes investing in Snapdeal would hasten the company's expansion in China's booming e-commerce market, as more Indians are expected to shop for accessories, clothes, electronics and books online.

China's e-commerce giant first made an investment in India in February when its financial-services affiliate, Ant Financial, took a 25-percent stake in One97 Communication Ltd.'s online-payment business.

The investment would provide Foxconn a base in India's booming market and rising demand for smartphones.

Next to China and the U.S., India is the world's third-largest smartphone market, in terms of shipments which reached a total of 20 million units in the first quarter, 21 percent higher from a year earlier, according to Counterpoint Research, a consulting company.

Foxconn has been looking to get into e-commerce and expand its manufacturing operations in India, as wages in China continue to rise and competition for Apple Inc.'s orders intensifies.

By investing in Snapdeal, Foxconn could help its customers, including Xiaomi and Micromax, find a way in the fast-growing electronics market. It is also looking to build a logistics operation and a funding platform to support startups in India as part of diversification efforts.