India’s leading mobile wallet and payments company Paytm has reportedly raised $1.4 billion from Japanese investor SoftBank in its largest funding to date, months after roping in China’s Alibaba as an investor into its marketplace business unit.
Softbank, an early investor in the e-commerce giant Alibaba, will take a seat on the board of Paytm, agency reports said. Paytm will use the funds to expand user base and build financial products, the reports said.
The mega deal comes even as the Indian e-commerce sector is abuzz with activity, with Softbank in the midst of transactions aimed at switching its stake in e-commerce major Snapdeal with that in the market leader Flipkart. Softbank has pushed for selling Snapdeal, in which it holds 33% equity stake, to Flipkart for $1 billion, and is believed to be mulling investing a similar amount in the combined entity in return.
Softbank’s fresh investment in Paytm, it is widely believed, will raise Paytm’s valuation significantly to $7-8 billion, from $5 billion last year when it raised $60 million from Mediatek. Meanwhile, Softbank has already brokered a deal persuading Snapdeal to sell its mobile payments unit Freecharge to Paytm for up to $90 million.
At the conclusion of the proposed mergers and acquisitions, Softbank would have switched its stakeholding in the struggling Snapdeal with that in the market leader Flipkart, and its equity in the smaller wallet company Freecharge with that in the largest firm Paytm.
Last week, investor Nexus Ventures reportedly agreed to take a $80 million payout in return for its equity holding in Snapdeal, paving the way for its sale to Flipkart.
Earlier in March, Chinese e-commerce giant Alibaba, which was widely tipped to be eyeing an entry into India for a long time, picked up a significant equity stake in the newly-formed marketplace business of Paytm, at a time when the incumbents in the country are reeling under operational pressures leading to retrenchments and cut in valuations.
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, Shopclues and others, making it one among the most prominent players in the fast-crowding Indian e-commerce industry.
Meanwhile, Flipkart too recently pulled a coup by buying Indian business of the EBay Inc, as part of an exercise to raise $1.4 billion — its single-largest to date — from a consortium of Tencent, Microsoft and EBay. As part of the agreement, EBay Inc will pay $500 million in cash and will transfer ownership of EBay.in to Flipkart, in exchange for an unspecified equity stake in the company.
The proposed new funding from Softbank will also likely help Paytm accelerate expansion ahead of the launch of its payments bank service. Paytm has seen manifold growth in transactions on its platform after the government scrapped high denomination notes in November last year.