Alibaba Diversification Provides Significant Upside

Alibaba has backed a wide range of companies in South Asia and Southeast Asia. It has gained market leadership in digital payments ecosystem in most of the countries in these regions. SoftBank which has close to 30 percent stake in Alibaba, has also made complimentary investments in a number of startups in this region. In the past few quarters, Amazon (AMZN) has been increasing its investments in India. At the same time, Walmart (WMT) has invested USD 16 billion in buying Flipkart at a valuation of USD 22 billion. In order to meet this challenge, two of the biggest startups backed by Alibaba are in talks to merge their operations.

Paytm Mall is an e-commerce company in India which is a subsidiary of Paytm and is backed by investments from Alibaba/SoftBank. Recently, Buffett also invested close to USD 400 million in this company at a valuation of USD 10 billion. Big basket is the leading online grocery player in this region. Merging the operations of Big basket in Paytm Mall will provide the company with a significant market base of customers which can help in increasing its market share in other segments. We could also see merging of operations by several other startups backed by Alibaba in order to gain market share from Amazon and Walmart. Alibaba’ s diversification initiative will gain a big boost if Paytm Mall ends up as a market leader in a three-way race in an important market in South Asia.— Seeking Alpha

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