COMING CHURN Market reaching maturity of players, key contenders will be decided in 6-9 months, says Paytm CEO; co to hive off its ecommerce business into a separate entity
The fight for India’s lucrative ecommerce market will be mainly between Amazon and Alibaba, with the contours of the battle likely to be clearer in about a year, says Vijay Shekhar Sharma, chief executive officer of Paytm, a company backed by the Chinese online retailing giant.
“The ecommerce business and market is reaching maturity of players. The next 6-9 months, it will be decided who the key contenders of the business are. Logically, to fight Amazon, you need the might of a strategic player that is why it makes a lot of sense for people to align with Alibaba versus a lot of others,“ Sharma said, signalling the possible start of consolidation in the Indian ecommerce market.
Paytm, a digital wallet and online retailer backed by Alibaba and its affiliate Ant Financial, is preparing to start a payments bank. It will spin off its ecommerce platform into a separate company , which will have a new name and brand and the same shareholders as Paytm. It will then look to raise funds or be merged or acquired.The entity will be separate from the company’s payments bank, which will go live around October, pushed back again by a quarter, Sharma said.
India’s ecommerce battle lines are already being drawn. Amazon, the world’s largest online retailer, said last month it will invest an additional $3 billion (over `20,000 crore) in India, raising the stakes after having spent about $2 billion.
The announcement came as existing biggies such as Flipkart and Snapdeal face additional pressure to raise fresh funds, when money is harder to find than before and the government has written up rules that bar platforms from offering deep discounts and cash-backs.
Alibaba plans to directly enter India’s online retail market, which Goldman Sachs projects will more than treble to $36 billion in 2016-17 from $11 billion in 2014-15. Alibaba Group Holding’s 40% share in Paytm gives the Chinese ecommerce giant a strong foothold in India to begin with. However, it also holds a 4% share in Snapdeal.
Sharma is timing the bifurcation of Paytm’s businesses around the festival of Diwali. “We are going to make the marketplace separate, then we will be able to raise money, or do M&A, which means we will look to acquire correct optimum sized (companies) to become larger,“ Sharma said, without sharing details of how much equity will be diluted to raise cash and who the new investors are likely to be.Sharma expects Paytm’s ecommerce business would be profitable on all levels by October, when Diwali will be celebrated this year. “Now is the time that Paytm should be identified with payments and financial services and commerce business can get its own name in due course,“ he said, adding that the move will bring clarity among merchants and investors, in terms of future investments, focus and also unlock value for both businesses.
On the payments bank side, the Noida-based company has put in place financial and technology integration on the backend from Infosys’s Finacle core banking software, and Wipro, preparing for a late October or early November launch. The start of operations will hinge on approval from the Reserve
Source: The Economic Times (Delhi)