 "Alibaba makes strategic investment in Paytm")
Chinese e-commerce giant Alibaba Group Holding, along with its payments arm, Ant Financial Services Group, on Tuesday said it had made a strategic investment in Paytm, run by One 97 Communications.
The companies involved did not disclose the investment amount, but sources within the company said Alibaba was investing about $680 million into the payments processor and marketplace. This meant Alibaba group's total investment in Paytm had risen to around $900 million, taking into account a previous round of funding by Ant Financial and a rejig of an agreement between these companies. Also, the latest investment makes Alibaba group the largest shareholder in Paytm, whose valuation may have zoomed to an estimated $4 billion and closing in on established rivals such as Snapdeal valued at $6-7 billion. Flipkart, the leader in the sector, is valued at over $15 billion.
In February, Ant Financial had committed to buying 25 per cent stake in Paytm for about $575 million. Of that, $200 million has come in two tranches - $65 million and $135 million. Sources said subsequently, there was a change in the terms of the agreement, pegging the cumulative investment of the Alibaba group in Paytm at $900 million. The Chinese group's investment in the Indian e-commerce sector crossed the $1-billion mark this year, counting the $500 million pumped into Snapdeal in August by a clutch of investors led by Alibaba, Foxconn and Softbank.
According to the new agreement, Alibaba and Ant Financial would each hold 20 per cent stake in Paytm and collectively the Alibaba group would have a 40 per cent stake, sources said. The stake of Paytm founder and chief executive Vijay Shekhar Sharma is learnt to have come down from 26 per cent to 21 per cent, while Saif Partner's stake is down to 30 per cent from 37 per cent earlier.
Citibank was the sole financial advisor to Paytm for the transaction.
Paytm said the fresh capital infusion would allow it to gain scale, develop a vibrant mobile commerce and payment ecosystem in India and invest in marketing, technology and talent. Recently, it had received a payment banking licence and it would seek to use the fresh funds to expand on that front, too, the company said.
"Paytm is building India's most dominant mobile payment and commerce ecosystem. With the Alibaba and Ant Financial partnerships, we look to bring half a billion Indians to the mainstream economy and help millions of small businesses leverage this large m-commerce opportunity," Sharma said.
"Ant Financial has worked seamlessly with Paytm in the past few months and our technical teams have developed significant improvements on the user experience of Indian consumers. Ant Financial and Paytm will collaborate to capture mobile payment opportunities. Paytm is best equipped to build a mobile payment ecosystem in the country," said Eric Jing, president of Ant Financial Services Group.
"India is an important emerging market, with strong e-commerce potential, and we look forward to partnering Paytm to deliver innovative products and services to consumers. This investment will further expand Alibaba Group's global footprint to India's thriving mobile commerce market," said Daniel Zhang, chief executive, Alibaba Group.
