The fresh investment by Alibaba Group Holdings subsumes the outstanding tranche of $375 million, and will see Ant Financial’s stake being lowered to 20%, one of the people aware of the details said.
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In their statement on Tuesday, the companies said the new funds would help Paytm expand its mobile commerce and payment system in India, as well as invest in marketing, technology and talent. Alibaba’s e-commerce services have opened internet commerce to vendors of all sizes in China, while Ant Financial – which is independent of Alibaba and valued in the $45-50 billion bracket – has introduced a range of banking services, including its own virtual bank and flexible, micro loans. While for Alibaba it’s the first investment foray into Paytm, Ant Financial made its initial investment in the company in February this year for a 25% stake.
Paytm’s business model is often compared to that of Alibaba’s, though at an earlier and less developed level. Investing in Paytm will enhance the ability of Alibaba and Ant Financial to tap opportunities in India’s fast-growing mobile e-commerce marketplace and digital finance industry, the companies said in a statement.
Paytm is a payment processor built specifically for India’s mobile shoppers. The strategic backing of Alibaba, which is also an investor in Snapdeal, gives Paytm a bigger war chest in a highly competitive domestic online commerce market right before the festive season kicks in. Supporting the success of local homegrown entrepreneurial companies has been an important part of Alibaba Group’s globalization strategy.
India is an enormous market for e-commerce businesses. Alipay wallet has more than 190 million users.
Alibaba is understood to have spent approximately $680 million for a 20% interest in the One97 Communications subsidiary.
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The latest investment follows the announcement that Paytm had attracted 100 million wallet users. With this major achievement, Paytm has inched closer towards its larger vision of bringing half a billion Indians to the mainstream economy. This was in addition to $60 million more from existing lead investor SAIF Partners.
