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Alibaba-Ant Financial Invest in Food Delivery Startup

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Chinese e-commerce giant Alibaba Group Holding Limited (BABA - Free Report) and its finance affiliate, Ant Financial, have jointly invest a total of $1.25 billion in Chinese online food delivery startup, is a website that offers customer-to-customer meal ordering services. It is also part of China’s online-to-offline (O2O) trend, where consumers use their smartphones to vail of offline services like booking a taxi rides to access restaurant review apps.

In Dec 2015, a leading business weekly Caixin revealed that an investment of $1.25 billion (roughly INR8,323 crores) in would give Alibaba a 27.7% stake in the startup, making it’s largest shareholder.

The latest investment will lend Alibaba a competitive advantage in China's rapidly growing e-Commerce market against the likes of search giant Baidu (BIDU - Free Report) , Meituan-Dianping and Alibaba's own platform Koubei.

Looking Ahead

Alibaba has been focusing on expanding beyond its e-commerce business. Thus, the company is presently focusing on O2O services which are deemed to be the next big thing in China’s e-Commerce space.

In this regard, in early 2015, Alibaba and Ant Financial agreed to invest around $483 million each in a new mobile shopping and dining information app, which would focus on China’s fast growing food-delivery market. In Nov 2015, Alibaba signed a deal to acquire Chinese Internet TV platform Youku Tudou Inc., also known as China's YouTube, in an all-cash transaction.

Meanwhile, research firm iResearch estimates a 30% per year growth rate for China’s O2O food delivery market which will likely cross the $32 billion mark by 2017.

Currently, Alibaba has a Zacks Rank #3 (Hold). Better-ranked stocks in the same space are Travelport Worldwide Limited (TVPT - Free Report) and Inc. (STMP - Free Report) , both sporting a Zacks Rank #1 (Strong Buy).

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