Chinese e-commerce giant Alibaba, which was widely tipped to be eyeing an entry into India for a long time, apparently did so quietly yesterday by picking up a significant equity stake in the newly-formed marketplace business of the homegrown digital payments major Paytm, at a time when the incumbents in the country are reeling under operational pressures leading to retrenchments and cut in valuations.
Alibaba Group Holding Executive Chairman Jack Ma. courtesy:Reuters
Alibaba’s $177 million investment in Paytm Mall, along with $23 million by the private equity player SAIF Partners, is sure to pit it against Amazon India,Flipkart,Snapdeal,Shopclues and others, making it one among the most prominent players in the fast-crowding Indian e-commerce industry.
With this investment, the stake of Alibaba and its payments entity Alipay in Paytm will go up to 62 per cent from 40 per cent currently. The deal could value the e-commerce firm at close to US$1 billion.
Alibaba and its affiliate Ant Financial had previously built up a 40 per cent stake in Paytm through investments including an injection of more than $500m in 2015. Their combined stakes in Paytm Ecommerce will now account for the majority of its stock. Singaporean fund SAIF Partners will account for the remaining $23m of the funding round.
Announcement of the launch of Paytm Mall’s app on Android a few days ago was widely seen as Alibaba’s first major move in the Indian market with Paytm.
Paytm founder Vijay Shekhar Sharma. courtesy :The American Bazaar
Paytm also has the unique advantage of being able to accessing Alibaba’s larger ecosystem – all of its acquisitions across the world, including e-commerce company Lazada Group in Southeast Asia, and Chinese-government-owned Suning Commerce – which can help Paytm expand beyond India in future.
Like Alibaba, Paytm’s strategy has combined online retail with financial services. It offers India’s most popular digital payments ‘wallet’ with 200m users, many of whom signed up amid the disruption caused by November’s sudden demonetisation of high-denomination banknotes.
This year it plans to launch one of a new wave of Indian payment banks, quasi-banks that can take deposits without making loans.
According to the statement from the company, Paytm Mall will also launch an upgraded version of the Paytm Seller app in seven regional languages. Curiously, the name ‘Paytm Mall’ itself is strikingly similar to ‘Tmall’, Alibaba’s B2C e-commerce arm, which holds more than 50 percent share of online retail in China.