The overwhelming response to Alibaba’s initial public offering (IPO) in the US last week has generated tremendous excitement among Indian e-commerce majors, who believe the development demonstrates high investor confidence for the sector in emerging markets.
“I think the Alibaba IPO validates there is a large opportunity in the emerging markets for e-commerce, and in fact larger than what developed markets would have,” said Sachin Bansal, co-founder and CEO of Flipkart. “It is a great example and is very motivational for us. It definitely makes the sentiment better for the Indian markets as well.”
Last week, China’s Alibaba Group Holdings made history when its IPO on the New York Stock Exchange topped a market capitalisation of $231 billion and became one of the most valuable companies in the world. The valuation of the Chinese giant is more than any Indian listed companies, and tops even the combined market capitalisation of market heavyweights Tata Consultancy Services, Oil and Natural Gas Corporation, and Reliance Industries.
Even as none of the large e-commerce companies has shared any plans for an IPO in the near-future, SnapDeal co-founder Kunal Bahl said the response to Alibaba’s IPO is an indicator to how investors will perhaps respond to the IPOs of any Indian e-commerce companies in the future.
“Today it is a Chinese company, because that market is much larger. But I think in due course, you will see similar size businesses come out of India as well,” Bahl said. “I think the market has always had an appetite for high growth businesses that are leveraging the strong consumer stories in emerging markets. But that said, given the amount of money that investors have made on Alibaba and the strength they have shown in the business, I think it’s a strong, leading indicator of the confidence that they will probably show when companies from India, Indonesia, or Africa go public in due course of time.”
While Flipkart has stated it would not look at an IPO in the near future, Bahl said SnapDeal has a plan for going public, but the company has not looked at a timeline for the same. He said the decision to go public would be taken based on several factors, including market conditions.
He added the decision on whether SnapDeal will list in India or overseas will be taken closer to when the IPO details are finalised, as regulations keep evolving, and Indian investors’ appetite for e-commerce companies is firming up.
“Whether we go public or not is not the question; it’s always a question of when. Alibaba went public 15 years after they started, so you have to give us a little bit of time,” said Bahl.