“Khul ja sim sim”

The following Editorial appeared in today’s Financial Express

Yahoo! Alibaba

There is feverish excitement over Alibaba, the Chinese e-tailing giant, being expected to raise almost $15 billion from its US IPO, on its way to a market cap of $152 billion, as per an analysts’ survey by Reuters.

Alibaba handled about $248 billion in transactions in 2013—that’s more than Amazon’s and eBay’s combined figures for that year—made by 231 million active users in its three main Chinese online marketplaces. All of this, of course, has fuelled what could be one of the largest IPOs in history.

However, it is Yahoo! that stands to walk away with windfall gains—in excess of $10 billion—from the offering, selling 208 million shares, or 40% of its 24% holding in Alibaba. This would mean a much-needed reprieve for Yahoo!—the company has been working on a turnaround under CEO Marissa Mayer for nearly 2 years now, but revenues remain elusive. Yahoo! could use the money for expansion which has for too long now seemed to be in the works, given its loose links with Yelp and Pinterest.

Though the Alibaba story isn’t entirely without blights—questions over cross-holdings by chairman Jack Ma are cropping up with greater vehemence—the big takeaway from this has to be just how poised e-tail is to eat into organized brick-and-mortar retail’s share. And instead of obsessing over whether FDI in organized retail would break the backs of the mom-and-pop stores, India would do a lot better to get it right with policy for e-tail. If one Alibaba IPO can possibly benefit a Yahoo! so much, then shouldn’t India have the right investment atmosphere for e-tail, which analysts say is expected to boom in the country in the next few years?

This is what I wrote to the Editor in response to the above Editorial:

Dear Sir,

This refers to your timely and thought-provoking Editorial titled “Yahoo! Alibaba” (FE 10th May 2014).

“Khul ja sim sim” the Hindi variation of “Open Sesame“, is a magical phrase in the story of “Ali Baba and the Forty Thieves” in One Thousand and One Nights. It opens the mouth of a cave in which forty thieves have hidden a treasure! 

Yes, the success of Alibaba IPO can certainly and literally open the doors to the much-needed foreign investment into our country. The new Government would do well to give a positive re-think to our FDI policy instead of debating about its negative impacts on our economy.

For Yahoo, the IPO would certainly prove to be the proverbial magic wand to transform the company’s fluctuating fortunes to fund its expansion plans and give a boost to CEO Marissa Mayer’s much needed credibility and vision after taking over the helms of the company around two years ago.

J S BROCA , NEW DELHI, 10^TH MAY 2014