Investopedia/Daniel Liberto: Amazon's Biggest Rivals in India Closet to Merging

Amazon's Biggest Rivals in India Close to Merging By Daniel Liberto | July 26, 2017 — 6:58 AM EDT
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Amazon’s (AMZN) bid to dominate India’s booming online retail market has been dealt a blow after sources confirmed that one of the U.S. giant’s biggest rivals in the sector, Flipkart, is set to purchase Snapdeal, another major player in the country’s lucrative ecommerce space.

Two sources told Reuters that Flipkart’s revised offer of between $900 million to $950 million was accepted by Snapdeal’s board last week, paving the way for the takeover to complete, barring any last minute objections from the company’s shareholders.

Snapdeal’s biggest investor, Japan’s Softbank (SFTBF), is said to be keen for the deal to go ahead, believing that an equity stake in Flipkart creates greater potential to profit from India’s booming online retail market. Snapdeal, which was rumored to be a $2 billion takeover target for Alibaba (BABA) at the end of last year, has been reportedly looking to sell itself for a while now after struggling with rising expenses, unsuccessful acquisitions and fierce competition from domestic and foreign players. (See also: India's Snapdeal Denies Reports of Alibaba M&A Interest.)

Earlier this week, local media reported that Amazon tabled a bid in the region of $70 million to $80 million to buy Snapdeal’s digital payment platform Freecharge. That deal could still go ahead, regardless of Flipkart’s potential takeover of its parent company, although Reuters believes that Indian private-sector lender Axis Bank is now the most likely candidate to bag Freecharge. (See also: Amazon Bids $70-$80 Million for Indian Payment Platform.)
India's Ecommerce Gold Mine

Ecommerce has grown at a compound annual growth rate in excess of 50 percent over the last five years in India, according to a 2016 report from accounting firm EY, driven by rising disposable incomes and better internet access. Those trends are expected to continue playing out in the years ahead — ecommerce sales in the country are predicted to reach $35 billion by 2020.

Against this encouraging backdrop, numerous domestic and foreign companies have been battling it out to become the number one online shopping destination for Indian consumers.

Some sources say that Amazon, which is investing billions to expand its presence in India, has emerged as the front runner in this battle. However, news that one of its biggest rivals, homegrown player Flipkart, is about to buy out another major competitor, Snapdeal, could undermine Amazon’s ability to keep growing its market share.
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