To help boost Paytm’s e-commerce business, Alibaba will reportedly be making an investment of $200 million which will give Paytm a valuation of about $1 billion.
Alipay, the payments affiliate of Alibaba, and investment firm SAIF Partners have also participated in the deal, reportedly.
The funding round will take the stake of Alibaba and its affiliate Ant Financial in Paytm E-Commerce, an entity newly created by One97 Communications Ltd to house the online retail business, to more than 50 per cent from 42 per cent, the two people said on condition of anonymity.
Paytm’s parent company One97 Communications Ltd was valued at $5 billion the last time it raised about $60 million from new investor Mediatek in 2016.
Paytm is expected to spin off the e-commerce business into a new mobile application and a separate website this month, Paytm officials said. The new platform will be named PaytmMall—inspired by Alibaba’s T-mall in China. The existing Paytm app will continue to have a link to the commerce business.
Paytm, which started out as a mobile payments and mobile recharge business, today ranks among the top three consumer Internet companies in the country. The company has aggressively built its e-commerce marketplace during the last two years by selling apparel, footwear, smartphones, bus tickets and movie tickets.
Founder Sharma is one of the 11 recipients of the Reserve Bank of India’s payments bank licences and is all set to launch a payments bank by the end of this month.
At $200 million Alibaba is entering the Indian market with an advantage that none of the big three; Flipkart, Amazon and Snapdeal have currently at this point in time. The mobile wallets business of Paytm and its upcoming payments bank gives Alibaba an edge in a new India that’s being pushed literally and otherwise into an economy that’s going to be “lesscash” and eventually “cashless”.
The big picture is that the Indian e-commerce market is expected to be worth $60 billion by 2020. It’s already big, worth $16 billion as of 2016 and growing at a faster clip of 45 per cent annually. Ironically, all three big e-players are bleeding losses as of FY 2016:
- Flipkart posted a loss of over Rs. 5200 crore
- Snapdeal over Rs. 3300 crore
- Amazon over Rs. 3500 crore
Together, the three companies have posted losses in excess of Rs. 11,000 crore in just one year.
According to reports, with $200 bn investment Paytm gets access to Alibaba’s robust e-commerce bank-end architecture, codes, engineering muscle, logistics supply chain and, of course, a chance to battle for possibly the largest e-commerce market in the world. Sum up these parts and the whole can be controlled. Or so it seems for Alibaba and Paytm.