Employees of Snapdeal, an Indian online retailer, sort out delivery packages inside their company fulfilment centre in Mumbai October 22, 2014.Reuters

Domestic online retailer Snapdeal is likely to see its valuation reach $5 billion, if a proposed $500 million investment in the company by Alibaba and Foxconn Technology fructifies. 

The Chinese e-commerce firm Alibaba Group Holding and iPhone assembler Foxconn are in talks with Snapdeal to buy 10 percent stake, The Wall Street Journal said, citing sources privy to the development.  

In November last year, Snapdeal received $627 million funding from Japan's SoftBank Group, taking its valuation to $2 billion. Apart from Softbank, eBay and BlackRock are the other major investors in Snapdeal.

A report by Goldman Sachs released last month said that domestic e-commerce firms such as Flipkart and Snapdeal will require another $20 billion (₹1.27 lakh crore) to sustain their current growth momentum over the next five years.

Alibaba has 25 percent stake in One97 Communications, the parent company of Paytm.

Paytm recently forayed into e-commerce and plans to add 1,00,000 Chinese sellers to its platform from August. The move by Patym is part of its major stakeholder Alibaba's strategy to expand its business outside China, The Economic Times reported.

Alibaba aims to garner a pie of the lucrative $6 billion (₹38,400 crore) e-commerce market in India.

An investment in Snapdeal will enable Alibaba to further expand its presence in the fast growing online retail sector in India. 

Earlier this year, Alibaba's talks with Snapdeal did not materialise due to differences over valuation, according to Business Standard.

For Foxconn, the investment will enable it to strengthen its position in the world's third largest smartphone market.

Foxconn is also looking to shift manufacturing operations to India from China due to rising wage costs in China.