A logo of Flipkart, India's largest online marketplace, is displayed on a building in Bengalaru. (Photo : Reuters)
Alibaba Group Holding Ltd. has been negotiating with Indian logistics firms Delhivery and XpressBees Logistics in a bid to buy or invest in a company that specializes in making deliveries for online companies, people privy to the matter said.
The Economic Times of India reported that the e-commerce giant also plans to get Paytm and pour in more capital into the Noida-based company in which it has 40-percent stake.
Alibaba's moves were seen as an effort to build the "iron triangle" of business, as Jack Ma called, which is made of e-commerce, logistics and payments, as well as to compete with major players such as Amazon and Flipkart.
In a statement, Alibaba said that there are huge possibilities in India, adding that the company is "committed to developing in the market for the long term."
Sources said that Alibaba is expected to buy a majority, if not a significant minority share, in a logistics firm to allow it to gain control of operations, adding that the company will decide on the investment in four to six months when it is ready to launch its horizontal marketplace platform in India.
Devangshu Dutta, CEO of retail consultancy Third Eyesight, said that Alibaba needed secure logistics since the infrastructure, vehicles, skills, regulation and systems are under-developed in India.
"Major players such as Amazon, Alibaba, Flipkart have to take direct or indirect control to ensure that their logistics capabilities evolve ahead of their own business growth curve," Dutta said.
A team from Alibaba, led by Alibaba's Global Managing Director K Guru Gowrappan and Bharati Balakrishnan, the first top executive hired by Alibaba in India, has reportedly met with top executives from Delhivery and XpressBees.
"They are putting their strategy in place," according to a source familiar with Alibaba's plan. "Fundamentally, they will buy and start with Paytm's online retail business, because a deal with Flipkart is not happening right now as they feel it is very expensive. They will get a logistics partner to build a network like Amazon, which is very critical."
Alibaba owns around 5 percent of Delhi-based online marketplace Snapdeal, aside from its shares in Paytm. Athough it had talked with Flipkart regarding investments, the two companies were not able to reach an agreement on terms and valuation.
Alibaba and Paytm are now discussing the corporate structure of the former's planned marketplace entity, where 100 percent foreign direct investment is allowed based on government regulation.
"All payments will be moved to the payments bank and e-commerce will be a separate entity, which Alibaba will invest in again," the source said. "We will see some announcements over the next three to six months."
