(Reuters) — Global tech giants are heading for a proxy war in India. Alibaba is leading a $200 million investment into Paytm’s marketplace, creating a new Indian unicorn. It confirms the intention of the Chinese behemoth to take on Amazon, which is aggressively ramping up, investing $5 billion into its local operation as other homegrown rivals flail. Only one of the tech big boys will emerge victorious.
The $255 billion Chinese group and Paytm have already invested together to build a dominant mobile-wallet payment business, now worth around $5 billion. Their smaller e-commerce unit is now being separated out to meet Indian regulations. After the latest fundraising, Jack Ma’s Alibaba and its own payments affiliate Ant Financial will effectively control the e-commerce company and continue to own a large stake in the payments arm, which must be majority Indian-owned.
Local rivals Flipkart and Snapdeal, backed by New York investment firm Tiger Global and Japan’s SoftBank, respectively, helped to establish the domestic e-commerce industry. But their future roles look uncertain as these global tech giants, with deeper pockets, get stuck into the market.
Privately owned Flipkart is fighting hard to maintain a narrow lead; investors now reckon it is worth as little as one third of its $15 billion peak in 2015. Meanwhile, the founders of Snapdeal are cutting costs and headcount; an email to employees admits errors in executing its strategy. Talk of a possible merger between Snapdeal and Paytm keeps surfacing in local media. That makes sense, given SoftBank already owns a near 30 percent stake in Alibaba and could lose a fortune fighting head-to-head to build market share.
For now, Indian e-commerce has become a free-for-all, and a stark contrast to China where foreign companies have struggled. But there isn’t room for everyone to financially succeed. Alibaba’s new commitment to Paytm E-commerce, following its success in building out a local mobile wallet business, puts it in a strong position. Fold in Snapdeal, and Amazon’s Jeff Bezos would face a significant obstacle in the road to global domination.