Rumour has it that China’s Alibaba is negotiating a new deal with Paytm on the lines of picking up more stake in the Indian ecommerce company. The Chinese ecommerce giant will invest over $600 million (Rs 4,000 crore) in exchange of an additional 20% stake.
In the beginning of 2015, Ant Financial that falls under Alibaba Group umbrella, had bought 25% stake in Paytm by investing $575 million in One97 Communications (that owns Paytm). According to this ET report, the initial investment was to be discharged in two installments. Out of the total $575 million, the first lot of funds that were given to Paytm was worth $200 million. The remaining was to be released later.
But as per the new deal that’s under discussion, instead of the outstanding tranche of $375 million, Alibaba will invest a total of $600 million which will get them additional 20% stake. And Ant Financial will reduce their stake by 5%, bringing it down to 20% from the earlier 25%. Making Alibaba’s total stake in Paytm 40%
If it materializes then Paytm’s valuation would jump from $1-billion to $3.7 billion (Rs 23,600 crore). This is a staggering 270% rise in valuation, that too within a year.
Besides the obvious rise in valuation, Alibaba and Paytm both will be one step closer to their main goal with this fresh funding and stake rise.
Alibaba’s aim is to be a global ecommerce leader and India is a very lucrative market for the company. It is through Paytm that the Chinese ecommerce player is looking to gradually make inroads in India.
As for Paytm, the transition from being just an online recharge platform to a huge online marketplace was made possible largely if not completely through their association with Alibaba. Today the company is a threat to all the Indian ecommerce leaders like Flipkart, Snapdeal and Amazon
40% stake will make Alibaba the largest shareholder in Paytm, but the founder, Vijay Sharma’s individual share is still more than owners of Flipkart and Snapdeal share in their respective companies.
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