In February, Alibaba’s financial arm Ant Financial picked a 25% stake in Paytm.
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It follows earlier moves by Alibaba to launch its own trade finance platform – e-Credit Line – in the United Kingdom, which allows United Kingdom small businesses to secure loans from alternative financiers ezbob and iwoca, in order to purchase goods from vendors using the Alibaba platform.
According to Reuters, the deal would see Alibaba directly invest about $600 million in Paytm. If the deal goes through, Alibaba will own 40% stake in One97, emerging as the largest stakeholder in the Indian startup, two sources familiar with the negotiations told Reuters. “The plan is to create an ecosystem through companies that have large consumer touchpoints”, the source told the publication.
Alibaba has refused to comment on the news saying that it is against its policy to state on market rumors.
“Paytm is expected to be Alibaba’s ecommerce play in India”.
The Alibaba Group was founded in 1999 by Jack Massachusetts and in September 2014 its market value was measured at a staggering US$231bn. To that end, the company is in talks to invest about $700 million in mobile phone maker Micromax, ET reported on June 25.
The investment is also likely to strengthen Paytm’s position against its rivals, which include Flipkart, Snapdeal etc. Aside from the funds, the investment will also prove to be beneficial for Paytm’s operations as it will be able to take advantage of its expertise etc. The entry of Amazon.com, Inc.
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Alibaba’s cash infusion will see existing investors diluting their equity. The latest investment will increase Paytm’s valuation by almost three folds to $3.7 billion. One97 Communications founder and CEO Vijay Shekhar Sharma’s holding will be diluted from 27% to approximately 22%.
