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eBay Invests $133M in Snapdeal

Zacks Equity Research

eBay Inc. (EBAY) recently made an investment of $133 million in Delhi-based Snapdeal.com. This is the second time that eBay has invested in the company. However, both the parties declined to comment on eBay’s current stake in Snapdeal.

Apart from eBay, Snapdeal’s other investors include Kalaari Capital, Nexus Venture Partners, Bessemer Venture Partners, Intel Corporation’s (INTC) Intel Capital and Saama Capital.

As per the agreement, not only will eBay increase its equity stake in Snapdeal, but also access its  customer base of 20 million and its engineering software and marketing networks. Also, the two parties can share each other’s technology and strategies.

eBay’s Indian subsidiary, eBay India, was launched more than eight years ago and offers over 3 million products to its 5 million registered shoppers. eBay is optimistic that the latest move would enhance the businesses of both Snapdeal and eBay India.

eBay’s investment in Snapdeal can be attributed to its complementary business model, strong brand name and management.

Snapdeal.com is India’s first online website to implement an e-commerce marketplace model. It was started in 2010 with the same concept as eBay's, the only difference being that it works only for businesses and not individual sellers.

eBay has long been eyeing the Indian marketplace. Digital commerce growth has accelerated due to the advent of advanced technology, inclusion of better modes of payments, delivery as well as increasing smartphone infiltration. In addition, a growing number of aspiring buyers and increasing wealth act as a growth engine for the online marketplace. Even though it is still at a nascent stage, there has been significant growth in the past 2-3 years.

In Jul 2013, eBay made its first investment of $50 million in Snapdeal to take on its global rival Amazon.com Inc. (AMZN), which has been expanding rapidly in Indian cities like Bangalore, Chennai and others.

eBay has been focusing on international growth and therefore increasing its foothold in Brazil, Russia, India and China (BRIC nations).

Recently, it entered into a partnership with the U.S. Department of Commerce (DOC) for the expansion of trade and investment in the world's largest economy.

Currently, eBay holds a Zacks Rank #4 (Sell).

Liberty Ventures (LVNTA), carrying a Zacks Rank #1 (Strong Buy), is a better-ranked stock in the same sector.

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