Chinese ecommerce giant Alibaba, an investor in Indian ecommerce firms Snapdeal and Paytm, has been approached by country's largest player Flipkart which seeks an investment, the front page story in the Mint today reports.



But the news comes with a twist: instead of offering premium or par valuations, Alibaba has offered to pick up shares at a discount to Flipkart's existing USD 15 billion valuation.

The article could imply two things: China's largest ecommerce firm is baiting its Indian counterpart perhaps only to test waters -- to see what response its offer elicits from the latter. Or, it could be a signal that Alibaba knows what many have been calling for for long: that a cash squeeze has or is on the verge of engulfing even Indian ecommerce unicorns, who have so far enjoyed virtually unlimited access to cash.

The Indian ecommerce scene has been dominated by Flipkart, Amazon and Snapdeal, with Paytm and Shopclues being other important players. These firms have so far set the growth charts ablaze, growing their gross merchandise values (or GMVs, a measure of the value of goods sold on their platforms) manifold. This has in turn helped them raise dollops of cash, which they have spent in a big way to power their growth further.

In fact, the top e-tailers' deep-discount strategies have been controversial, they have not only been accused of running afoul of predatory-pricing norms but have also raised questions over whether these FDI-funded companies truly are "marketplaces" (companies that serve only as a technological platform to bring buyers and sellers together). In India, laws are said to allow FDI only in marketplaces, which interpretation has also been challenged by some.

But the Mint story seems to confirm that the end of the burn-money-for-growth strategy is likely nearing an end.

It must be remembered that last fiscal, between the three, Flipkart, Snapdeal and Amazon India notched up losses in excess of Rs 5,000 crore. It now appears that the Flipkart and Snapdeal now have enough cash only to sustain them for another 12-15 months at their current burn rate. Amazon, on the other hand, is backed by its strong US parent, which last year pledged to invest USD 2 billion in its Indian unit.

So far, the top ecommerce players have squeezed smaller players by sheer dint of cash. The business strategy has been simple: use their position of strength to beat smaller players on product pricing, hoping to drive them out of the market.

But in future, if the likes of Flipkart and Snapdeal find themselves running short of cash even as someone like Amazon is still willing to duke it out, they will likely face the onslaught of the strategy they themselves started.