Chinese e-commerce major Alibaba Group’s affiliate company Ant Financial Services, which operates the online payment solution AliPay, will be acquiring a 25% stake in One97 Communications for an undisclosed amount, according to the companies. One97 runs the mobile-only marketplace and digital wallet service Paytm. Paytm will use the funds to grow its mobile payment ecosystem, and on commerce user base acquisition. An Economic Times report mentions that Paytm will also be investing on a platform to aggregate courier companies to offer nationwide delivery services and for hiring new employees. Ant Financial Services vice president Cyril Han told ET that the deal will closed in the second quarter of this year.
As part of the deal, Ant Financial will also provide Paytm with strategic and technical support for its business. The companies are also expected to work on new product and service offerings. That such a deal was in the offing was first reported in early January. At the time, the deal was expected to be worth $575 million for a 30% stake.
It had been suggested that Paytm might start featuring merchants from Alibaba’s Taobao marketplace following this investment, similar to how Snapdeal started featuring eBay listings on its platform after raising investment from them. AliPay was also expected to be integrated to Paytm’s mobile wallet solution. Paytm is also likely to use the funds to foray into international markets. In December last year, it had roped in Milaap co-founder Sourabh Sharma to lead its Singapore expansion and had also stated plans to expand to other Southeast Asian markets like Indonesia, Thailand and Malaysia.
It’s worth noting that SoftBank, that owns 32% stake in Alibaba, was also reported to be in talks with Paytm to invest $300 million for a significant minority stake in October last year. This was around the same time when SoftBank invested $627 million in e-commerce marketplace Snapdeal and led a $210 million investment into online cab booking service Ola.
Nikhil adds: It’s worth noting that the investment is from the company that owns AliPay, and not the listed Alibaba entity. Paytm founder Vijay Shekhar Sharma has also applied to the Reserve Bank of India for a payments bank license. The question that we’ve heard often about Paytm: is it an e-commerce marketplace or a payments company? The answer might lie in Alibaba, which is both a marketplace business, and has a payments business in AliPay. Paytm appears to be looking to do the same.