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Aibaba and its payments unit Alipay had earlier infused US$680 million into Paytm in September 2015
After last year’s temporary lull, it seems India’s e-commerce market is on the path of revival. Amidst the reports of funding crunch and valuation mark-downs, the Indian e-commerce sector is hearing some glad news.
As per a report by The Economic Times, Chinese e-commerce giant Alibaba Group is investing between US$200 million and US$250 million in Indian mobile commerce and wallet company Paytm. With this deal the Alipay-Alibaba combine, which had earlier infused US$680 million into Paytm in September 2015, will now own over 50 per cent in the firm, the report said quoting two unnamed sources.
A formal announcement in this regard will happen in the coming weeks.
The latest funding infusion will give a huge war-chest to Paytm to take on mighty Flipkart and Amazon — who together enjoy nearly 70 per cent of the e-commerce marketshare in India — as well as Snapdeal. It is also a shot in the arm for Paytm, whose mobile wallet business got a boost with the demonetisation announcement by the Indian government in November 2016. Since then, Paytm has acquired millions of customers.
According to one of the sources mentioned above, post-investment, Paytm’s online marketplace will be rebranded to either PayTM Mall or PayTM Bazaar.
Paytm, run by Noida-based One97 Communications, is an m-commerce-cum-mobile recharging platform. Started in 2000 by Vijay Sekhar Sharma, the company offers digital goods and services, in addition to mobile advertising, marketing and payments to merchants. The company has raised close to a billion dollars in funding in total from the likes of SAIF Partners, Sapphire Venture and Silicon Valley Bank, and well-known industrialist Ratan Tata.
The company recently launched its payments bank, which can accept deposits from individuals and small businesses of up to INR 1 lakh (US$1,500) per account.
Paytm recently added K Guru Gowrappan — Global MD of Alibaba Group — to its board as an Additional Director. Days before this development, it had roped in Mark Schwartz, Vice Chairman of the Goldman Sachs Group and Chairman of Goldman Sachs in Asia-Pacific, to the Board. Schwartz had played a major role in helping Alibaba Founder Jack Ma and Executive Vice Chairman Joseph Tsai with its US$25 billion IPO in New York in 2014.
2016 was a bad year India’s e-commerce companies. An investment crunch forced companies like Flipkart and Snapdeal to take a back seat and they ceded significant marketshare to their closest rival Amazon. Flipkart also saw its valuation being marked down several times by its minority investor Morgan Stanley. Last December, US-based investment firm Vanguard Group also marked down the value of its stake in Flipkart by 33 per cent.
In February last year, it was reported that Chinese e-commerce giant Alibaba was planning to acquire Flipkart. However, the talks did not make much headway, as Alibaba — which is also an investor in Snapdeal — felt that the Indian e-commerce giant was overvalued. Now with the reports of Alibaba’s investment in Paytm emerging, this acquisition rumours have been put to rest, at least for the time-being.
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