Baidu, China's biggest Internet search company, is in talks to make its first investment in India, joining compatriots Alibaba and Tencent that are actively scouting for promising startups in the country to build their global portfolios.
Baidu has expressed interest in acquiring a majority interest in Mydala.com, India's largest discount marketing firm, for as much as $100 million (about Rs 664 crore), two people with knowledge of the discussions said.
Kinobeo Software, the owner and operator of Mydala, is seeking a valuation of $150-200 million, these people said, declining to be identified. Malaysian sovereign fund Khazanah Nasional Berhad is also seeking a majority stake in Mydala, they said. For domestic startups scrambling for growth funds, the Chinese Internet giants offer the promise of more than just investments.
Alibaba Group, Tencent and Baidu have emerged as global successes with technology and business models capable of challenging the likes of Amazon and Google in niche markets.
Baidu, which trades on US stock exchange Nasdaq and has a market capitalisation of $69.2 billion, recently made evident its plans for investing in India and Indonesia. Chief Financial Officer Jennifer Lee said the two emerging economies have "a lot of characteristics that mimic China's development", Bloomberg reported. A Mydala spokesperson declined to comment, saying the company does not respond to speculation.
Baidu, too, declined comment on a possible investment into Mydala, but a spokesperson said: "Of course, strategic investments or M&As that will help us round out our local user base and form a solid foundation for our products are a definite possibility in the future. We absolutely plan to be in India for the long term."
The company, which opened its India office in Gurgaon in January, has launched four mobile products in the country. Baidu said in September it had 45 million aggregate monthly active users in India. Delhi-based Mydala has appointed investment banks Morgan Stanley and Equirus Capital as financial advisers for its latest fundraising.
Currently, Info Edge owns about 44% of Mydala and most of the remaining ownership rests with the founders and employees of the sixyear-old firm. Ajay Relan and Jayanta Basu, founding partners of private equity firm CX Partners, have also invested in Mydala in their personal capacities. ET could not immediately ascertain if Info Edge, an investor in Zomato and owner of online classifieds Naukri and 99acres, will participate in Mydala's latest fundraising round. Alibaba Group, along with affiliate Ant Financial, injected $680 million in mobile goods and services venture Paytm in September, a month after Tencent led a $90-million funding round in healthcare startup Practo.
For Malaysia's Khazanah, an investment in Mydala will be its second in India's consumer internet sector, after it participated in a.`250-crore funding round in online lingerie retailer Zivame in September. Khazanah did not reply to emails sent by ET.
Baidu in October 2014 acquired control of Brazil's Peixe Urbano, also an online-discount company, for an undisclosed sum. "Baidu has been looking at (the discount couponing) space in India for some time now," said Kunal Walia, managing partner of boutique investment bank Khetal Advisors. "They are attracted to the high number of users, especially in the classifieds space that cater to the small and medium enterprises.
"Mydala, founded by Anisha Singh, Arjun Basu and Ashish Bhatnagar, offers deals in 209 cities and has about 28 million customers. But the overall online coupon discounting model has been facing turmoil in India. In August, discount deals firm Groupon India was rebranded as Nearbuy after Sequoia Capital invested Rs 100 crore in the venture for a significant minority stake while gaining a majority voting interest. An investment by Baidu in Mydala will be "an opportunistic bet", said Walia. "Valuations are coming down and, therefore, why not take the biggest bite possible? For strategic investors, it's a great value addition."