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eBay Sells Part of Its Stake in Snapdeal, the Alibaba of India

EBay has essentially earned back its investment, and is now playing with "house money" with its remaining stake.

EBay has sold a chunk of its stake in India’s e-commerce marketplace Snapdeal, as the American company looks to hedge its bets and reinvest money in its own Indian shopping site, the company will announce on Tuesday.

The sale of the partial stake will earn eBay about the amount it invested in Snapdeal for all of its shares, while still giving it the upside to earn more with its remaining stake, according to a person familiar with the deal. Exact terms of the deal were not disclosed.

EBay has invested in several Snapdeal financing rounds, including a $133.7 million round it led in 2014. At the time, eBay’s Devin Wenig told Re/code that there was the potential for eBay to someday buy all of Snapdeal.

But as interest in Indian e-commerce has skyrocketed, Snapdeal’s valuation has grown to a reported $5 billion. As a result, eBay executives recognized that an eventual acquisition would likely be too expensive for the company’s taste. Selling its stake allows it to get its money back; executives view the remaining stake as “house money,” the source said.

It’s not clear whether the stake was sold in the $500 million round Snapdeal recently raised from Alibaba, Foxconn and SoftBank, which Re/code first reported, or in a separate transaction.

Snapdeal was founded in 2010 and has undergone several iterations since then, including one as a Groupon clone. Today, it’s an online shopping marketplace that sells a wide range of general merchandise and competes against Flipkart, a homegrown Indian competitor currently valued at around $15 billion, and Amazon, which is investing billions into its site there. The three companies are engaged in a highly expensive customer acquisition battle in which undercutting on price has become one of the sole forms of differentiation.

Snapdeal has been trying to change that and has started to develop an ecosystem of sites by acquiring companies such as FreeCharge, a prepaid phone payment site, and RupeePower, a comparison shopping site for credit cards and loans. This strategy has been strongly influenced by the success of China’s Alibaba, which operates a host of different marketplaces engaged in various forms of commerce.

EBay will use some of the proceeds to invest in its eBay India site, which is not among the top three shopping sites in India, but which the company is still committed to. And for good reason. The e-commerce industry in India is expected to grow more than 50 percent for the next several years, fueled by a new generation of people connecting to the Internet for the first time on affordable mobile phones.

This article originally appeared on Recode.net.