The talks between Chinese giant Alibaba and India's online retailer Snapdeal has fallen apart owing to high valuations being demanded by Snapdeal.

The deal which was estimated at around $500-700 million has hit a dead end. The reason being reported is high estimation sought after by Snapdeal.

Both the companies refused to comment on the issue. According to sources Alibaba was estimating the e-commerce firm at about $4-5 billion but Snapdeal is seeking around $6-7 billion. Buying stake in Snapdeal would have given Jack Ma-led Alibaba a stronger grip in the Indian market.

Last month, Ant Financial Services - part of the Alibaba Group - held that it will purchase 25 per cent stake in One97 Communications, the parent of mobile commerce firm Paytm.

Private equity firms and angel investors are backing Internet-led businesses and start-ups in India.

Including Japanese telecom giant Softbank's $627 million and Ratan Tata's personal venture last year, Snapdeal has raised around $ 1 billion.

Its arch rival Flipkart had raised a $1 billion funding last year. It is the largest to date in the new Indian e-commerce sector.

Also, Amazon has also decided to invest $2 billion to strengthen its foothold in India.

The e-commerce sector has grown by 34 per cent since 2009 and reached $16.4 billion in 2014. It is projected to touch $22 billion in 2015