After picking up 25 percent stake in Paytm earlier this year, Alibaba is said to be looking to invest further in one of India’s most successful startups. According to an Economic Times report, the Chinese online giant is in advanced talks with Indian m-commerce company to increase its stake to 40 percent, testifying its faith in the rapidly growing online business sector in the country.
According to the publication, Alibaba is looking to invest over $600 million (Rs 4,000 crore) to pick up a 15 percent additional stake, and this new funding will value Paytm at $3.7 billion (Rs 23,600 crore).
“Paytm is expected to be Alibaba’s e-commerce play in India. The plan is to create an ecosystem through companies that have large consumer touchpoints,” the source told the publication.
In order for this financial deal to take place, existing investors will dilute their shares to make room for Alibaba. Saif Partners will dilute its equity to 32 percent from 37 percent while founder Vijay Shekhar Sharma could reduce his shareholding to 21-22 percent.
The money raised from Alibaba will be used for expansion purposes. Paytm recently announced that it now has over 50 million wallets on its platform, and looks to make it to 100 million by year end as it is expanding its reach to the local roots and even auto rickshaw and cab drivers. The company plans to spend Rs 500 crore on brand promotion and is also setting up 50,000 retail shops in India to make digital wallets a habit.
The current valuation of Paytm is said to be around $1.5 billion, after Alibaba picked up 25 percent stake in the company. Even Ratan Tata put his money into the company, and became the personal adviser to Vijay Shekhar Sharma’s venture.
Meanwhile, Alibaba also looks to increase its footprint in the Indian online space and is investing heavily in many small and large businesses. It is reportedly in talks with many small e-commerce businesses to build a large ecosystem, to compete with Flipkart and the likes. It is also reportedly in talks with Micromax to pick up 25 percent of its stake for Rs 4,200 crore.