Alibaba holds off new deals in India as it re-evaluates its past investments

The Jack Ma-led firm has some of the most valued companies in its portfolio such as Paytm, Zomato and BigBasket.

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Chinese e-commerce giant Alibaba has decided to wait and watch the performance of its existing Indian portfolios before investing in any new Indian startup. Four people aware of the development told local newspaper Mint, that Alibaba’s India team, led by Raghav Bahl, has been told to manage the current portfolios and not to look for new investment opportunities.

“We remain committed to our existing presence in the India market. As a company policy, we do not comment on market speculation,” an Alibaba spokesperson told the newspaper in an emailed response.

Alibaba has been one of the pioneers to invest in Indian startups such as online grocer BigBasket, fintech firm Paytm and its e-commerce arm Paytm Mall, erstwhile unicorn Snapdeal, food delivery company Zomato, among many others. However, what is worrying the Jack Ma-led company is the lack of any exit and poor performance of a few of its portfolio companies such as Snapdeal and Paytm Mall that are fast losing market share to their competitors Flipkart and Amazon.

“They are not seeing the kind of opportunities in India within Alibaba’s ecosystem that will really compel them to invest. So, while they also have to work to get some exits, they would rather wait it out and not invest, rather than make risky investments,” said a senior investment banker who has worked on past deals with Alibaba.

In comparison, Alibaba’s peers have done well as far as exits are concerned, and are now looking to further increase their affair in India.

While Tencent exited from its Flipkart investment in 2016 post Walmart’s USD 16 billion acquisition—biggest in the e-commerce space—South African technology giant Naspers sold its entire stake in the Indian OTA MakeMyTrip to Chinese travel company Ctrip earlier this year.

As the Japanese internet behemoth SoftBank launched its second Vision Fund of 100-billion-dollars, it said it is set to invest USD 2-4 billion in Indian startups by 2021. Most of the foreign funds are also expanding their team size in India and setting up local offices to be closer to the deals. Beijing-based VC fund Fosun RZ Capital is increasing its team in India as it looks for local analysts to help it with its hunt for startups with the potential to become the next unicorn.

Before deciding to put a pause on India investments, Alibaba was considering to put smaller bets in early-stage companies instead of writing big cheques. In April this year, it launched a USD 100 million fund BAce Capital—backed by its fintech arm Ant Financial—to invest in Series A and B round. It made its first investment in India with a USD 8 million round in Bengaluru-based Healofy, a digital platform for pregnancy and parenting tips.

According to a report by analytics firm Tracxn, Indian startups received USD 5.6 billion from Chinese VCs in 2018.