Alibaba Group Holding Ltd. (BABA) may be the dominant ecommerce giant in China, but with that market saturating, the company is setting its sights on India. Bad news for Alibaba: so is eBay Inc. (EBAY), which is reportedly investing more than $1 billion in one of India’s leading ecommerce players, Flipkart.

According to a report in India's The Economic Times, Flipkart is in talks to close a new round of funding of as much as $1.5 billion with eBay and Tencent Holdings Ltd. of China named as the leading investors in the deal. If the investment comes to fruition, it will mean Flipkart is landing two deep-pocketed strategic investors to enable it to compete better with Amazon.com Inc. (AMZN) and Alibaba. The report, which cited three people aware of the talks, noted a third unidentified investor may also take part in the investment.

One source told the newspaper that discussions with eBay are at the “advanced stages” and could include eBay and Flipkart merging their Indian businesses. Earlier, The Economic Times reported Flipkart, valued at $5.56 billion by a Fidelity mutual fund in January, was in talks with investors with Microsoft Corp. (MSFT) also named in addition to eBay and Tencent. Flipkart needs the cash to better compete with Amazon. (See also: India Unicorn Flipkart Seeks Cash to Battle Amazon.)

India Ecommerce Set to Be Red Hot

For eBay, Alibaba and Tencent, expanding further into the Indian market could be big business for the online retailers. According to The Economic Times, the Indian online retail industry is currently valued at up to $16 billion and more growth is expected in the coming years. Morgan Stanley is forecasting online sales in India to hit $119 billion by 2020.

Earlier this month Alibaba raised its stake in its stake in Paytm E-Commerce Pvt., the Indian ecommerce arm of the payment company, which is behind Flipkart and Amazon. In a regulatory filing covered by Reuters, Paytm E-Commerce disclosed it raised $200 million in venture funding from VC fund SAIF Partners and Alibaba. With the investment, the Chinese ecommerce giant, through Alibaba.com Singapore E-Commerce Pvt., gets a 36.31% stake after investing $177 million. SAIF Partners, which invested $23 million, gets a 4.66% stake with its investment.

Alibaba is also the biggest shareholder in One97 Communication, which owns a stake in Paytm E-Commerce, reported Reuters. Alibaba and Ant Financial, its affiliate company, already owned a 40% stake in Paytm with an investment of $500 million in 2015, according to the FT.com. Alibaba now holds a majority of Paytm Ecommerce. Alibaba's move to increase its stake in Paytm E-Commerce comes at a time when the ecommerce giant is starting to see sales in China online slow and is looking at new markets. 

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