New Delhi | Bengaluru:
“Paytm is expected to be Alibaba’s ecommerce play in India. The plan is to create an ecosystem through com panies that have large consumer touchpoints,“ said the source famil iar with the deal, adding that the fresh funds would be used to expand operations.
The deal is expected to catapult Paytm into the big league of Internet marketplaces alongside Flipkart Snapdeal and Amazon India, with its backing by Alibaba, the $200-billion behemoth, giving it both expertise and staying power in an intensely competitive business. The financial contours of the transaction being negotiated could see existing inves tor Saif Partners dilute its equity to 32% from 37% while Paytm’s foun der and Chairman & Managing Di rector Vijay Shekhar Sharma could reduce his shareholding to 21-22% from 27% now, the source said.
ALIBABA TO BE BIGGEST SHAREHOLDER
Alibaba Group Holdings could pick up a 20% stake in the company under this transaction while its affiliate Ant will see its existing 25% stake in the company reduce to 20%. The Alibaba Group will end up as the biggest shareholder in the company , although Sharma, 37, who founded One97 in 2000 two years after graduating from the Delhi College of Engineering, will still own more than what his founder peers in rivals Flipkart and Snapdeal own in their firms.Representatives of the Alibaba Group and Paytm declined to comment while an emailed query to Saif seeking its response did not elicit any response.
“As a matter of company policy , we decline to comment on market rumours and speculation,“ an Alibaba Group spokesperson said in response to a query seeking confirmation. “We decline to comment on market speculations,“ said a spokes person of Ant Financial, a financial arm of Alibaba. Paytm and One97 founder Vijay Shekhar Sharma also declined to comment.
Paytm had raised $200 million from Ant Financial, an Alibaba Group firm that controls its Alipay arm, in February this year in exchange for a 25% stake. The initial deal was to invest $575 million in two tranches, and one of the sources cited above said the latest $600 million funding is in place of the second tranche of the earlier investment.
Meanwhile, Paytm, which first began life as a provider of value-added services to telecom firms and later pivoted its business model to become one of India’s earliest mobile wallet firms, has been building on its latest pivot as an Internet retailer. Last month, Paytm said nearly 1,00,000 sellers from Alibaba’s online shopping portal AliExpress would start retailing on its platform in India from August. It is also targeting 100 million mobile wallet users by the end of December 2015.
ALIBABA WANTS TO CREATE ECOSYSTEM
In India, Alibaba wants to create an ecosystem of mobile devices, operating systems, electronic payment solution and services such as entertainment and commerce on top of the ecosystem. To that end, the company is in talks to invest about $700 million in mobile phone maker Micromax, ET reported on June 25. The handset vendor in turn is looking to invest up to $400 million to buy into startups, creating a bouquet of services for its buyers and at the same time adding to Alibaba’s ecosystem. Micromax has already picked up minority stake in Bengaluru-based health and fitness company `HealthifyMe’ in May, and is looking to make nearly 20 such investments this year.
Alibaba has also signed up former Citi executive Kshitij Karundia to a team headed by founder Jack Ma’s key lieutenant Ji Gang to chart out its investment strategy in India. Karundia has worked closely with Alibaba and Paytm as an investment banker at Citi. The Indian startup and ecommerce ecosystem has caught Ma’s attention. Ma, a former school teacher, has been to India twice in the past year, signalling his interest in investing in a country whose Internet market, according to Morgan Stanley, is expected to be the fastestgrowing in the world and reach a `8.7 lakh crore) size of $137 billion (.by 2020. Consulting firm AT Kearney said earlier this month that it expects the Indian retail market to grow to $1.3 trillion by 2020.
Source: The Economic Times