Mobile-focused e-commerce marketplace Paytm is raising $575 million from China’s Alibaba in return for 30% stake, reports The Economic Times citing sources. It says the company is raising this investment at a valuation of $1.9 billion and the deal is likely to be signed within a week. Paytm told the publication that it is currently in the process of raising money and “will communicate as and when we complete the process”, while Alibaba declined to comment.
Paytm to become Alibaba’s strategic partner in India?
Besides the investment, the deal also seems to be a strategic one for both Paytm and Alibaba. ET cites sources to suggest that Paytm will start featuring merchants from Alibaba’s Taobao marketplace following this investment, which fits in well with the company’s focus on long tail merchants. Readers might remember that Snapdeal started featuring Ebay listings after raising investment from them. Alibaba’s payment platform Alipay will also be integrated to Paytm’s mobile wallet solution. “Paytm will become Alibaba’s Taobao and Alipay for India”, said one of the sources to ET.
The Wall Street Journal also cites a source to suggest that Indians will be able to shop on Alibaba’s sites and make payments through Paytm, while Chinese customers will be able to buy from Paytm’s merchants by using Alipay.
It’s worth noting that SoftBank, that owns 32% stake in Alibaba, was 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.
Singapore expansion & Payment bank
Paytm is likely to use this investment to strengthen its e-commerce operations in a market dominated by three players – Flipkart, Amazon India and Snapdeal who’ve raised a massive $4.8 billion investment between them last year.
It will also probably use this investment to foray into International markets. Last month, Paytm had roped in Milaap co-founder Sourabh Sharma to lead its Singapore expansion last month and had also stated plans to expand to other Southeast Asian markets like Indonesia, Thailand and Malaysia.
The company is also considering applying for a payments banking permit, which is quite a natural move, since the finalizing of the payments banks guidelines is likely to be a precursor to the winding down of the Prepaid Payment Instruments license, which Paytm currently has. Paytm VP of business Amit Lakhotia had told last month that the company doesn’t have plans of partnering a bank for this as it would allow them to offer incentives like higher interest rates to customers.