It is the stuff of fairy tales, except that the main protagonist of the story rose to success not riding on luck but through talent and hard work. Jack Ma, the Internet entrepreneur from Hangzhou, China, who started his online marketplace Alibaba back in 1999 with just $60,000 as capital, is now the toast of Wall Street, having completed the >biggest-ever initial public offer (IPO) at $25 billion. In the process, he has not only become the richest man in China with a net worth estimated at $22 billion but left several records broken on the wayside in Wall Street. Alibaba Group Holdings is now a more valuable company than blue-chips such as IBM, Procter & Gamble and Coca-Cola and its market capitalisation is higher than that of its competitors Amazon and eBay combined. That China’s biggest market for its manufactured products is the U.S. is well known, but is the latter also becoming its biggest financier? Next to Alibaba, the biggest IPO ever in Wall Street was that of Agricultural Bank of China which raised $22.1 billion in 2010, and there are many more examples of Chinese companies that have raised money in the U.S. To be sure, Indian companies had issued American Depository Receipts and listed in the U.S. many years before the Chinese, but the scale and character are simply not comparable.
Alibaba’s valuation at $231 billion on listing day has set off fears of a new bubble in the U.S. market. Questions over Alibaba’s opaque ownership structure, the concentration of voting powers with Mr. Ma and his close circle, besides the emerging competition in China are being quoted as factors that do not justify the valuation that Alibaba has secured. To some analysts, the frenzy over the Alibaba listing is similar to the madness that prevailed in Wall Street during the days of the dotcom boom. Yet, the fact is that unlike the dotcom-era companies that commanded respect only on the basis of promise and not profitability, Alibaba is a profitable enterprise that is also a dominant player in China’s e-commerce industry. Meanwhile, the big splash that the Chinese company has made must be an eye-opener for >Indian e-commerce firms such as Flipkart. Though there is no comparison between China and India either in terms of Internet penetration or the size of the online market, the truth is that India’s e-commerce industry is now at an interesting stage. Flipkart, the market leader, has already secured several rounds of funding, but competition is not far behind. Amazon is turning on the heat and has declared its intention to dominate the Indian market. While the firms slug it out and the consumer benefits, the government should push broadband access and frame enabling policies for the growth of this sunrise industry.
