Paytm Marketplace Raises $200 Mn Led By Alibaba; It’s Alibaba vs Amazon All Over Again!

It has been a sluggish year for the Indian ecommerce players so far – Snapdeal might just be going off the radar and Flipkart is facing valuation dips while struggling to raise a fresh round of funding. To further add on to the list of worries for India’s ecommerce poster boys – Alibaba is leading a massive $200 Mn round in Paytm’s recently formed ecommerce unit.

According to the filings with the Registrar of Companies (RoC) reviewed by Inc42, the round in Paytm E-Commerce Pvt. Ltd, will be led by Alibaba Singapore E-Commerce Pvt. Ltd, a wholly-owned subsidiary of Alibaba Group Holding Ltd, which will invest $177 Mn (INR 1,182 Cr), along with $23 Mn from SAIF Partners.

According to our calculations based on the filings, this round will set Paytm E-commerce’s valuation at about $573 Mn. However, other reports have emerged quoting anonymous sources placing the valuation to be at about $1 Bn. The filings, however, only contain a statement disclosing details of this round and will close within the next six months.

The funding also marks Alibaba’s formal entry into the Indian ecommerce market, which will not only provide a major boost to Paytm’s relatively nascent ecommerce arm but will also provide all the backing required to gain a dominating market share – given Alibaba’s experience and learnings from running ecommerce businesses across 190+ countries.

Once the round is completed, Alibaba Singapore E-Commerce will have a shareholding of 36.31% and SAIF Partners (across its Fund III, IV & V) will have 23.09% stake, in the company. The round will take Alibaba and Alipay’s combined shareholding to 56.49% in the ecommerce arm.

In August 2016, after securing a $60 Mn funding round, One97 Communications, which runs Paytm, created a separate entity called Paytm E-Commerce Pvt. Ltd and transferred its online retail business onto it. Paytm’s founder Vijay Shekhar Sharma had also announced plans to invest $120-149 Mn in developing the new entity.

Earlier this week, Paytm made a major move towards capturing more Indian ecommerce customers by announcing the launch of Paytm Mall – closely modelled after Tmall, the Alibaba-owned marketplace B2C retail ecommerce play in China.

Built around the combination of the ‘Mall and Bazaar’ concept, Paytm Mall reportedly has over 1.4 Lakh sellers spread over 1000 cities, 68 million products across categories like fashion, electronics, consumer durables and home furnishings among others at their convenience at the moment, as claimed by the company. With over 17 fulfilment centres across India, the platform plans to offer sellers the widest reach through its vast network of over 40 courier partners.

Furthermore, there are also plans to add over a billion products from global sellers in the next six-eight months, such as sellers from across Southeast Asia, including Indonesia’s Lazada, another key Alibaba investment.

Paytm was initially launched as a mobile payments business in 2010 and entered the ecommerce segment in 2014. The recently launched Android app is an extended version of the same.

Ecommerce, Wallets, And War Chests

The funding has come at a time when, on one side, homegrown companies such as Snapdeal and Flipkart are working towards becoming profitable and desperately trying to cut down their burn rates.

Amazon, on the other hand, has been marketing aggressively in India and is pumping in more money into its initiatives like Prime. After the initial $2 Bn, it had committed an additional $3Bn for the Indian markets and the results are showing. Amazon, at second place, is closing in on Flipkart’s market share and has left Snapdeal at a distant third in 2016.

Paytm’s parent company, One97 Communications, has diversified into three business entities – Paytm E-Commerce, Paytm Payments Bank, and Paytm Mobile Solutions. The company was valued at $4.8 Bn, last year, when it raised $60 Mn from Taiwan’s Mediatek. Ant Financial owns 32% while Alibaba owns about 8%, in One97 Communications.

In January 2017, it finally received permission from the Reserve Bank of India to formally launch the Paytm Payments Bank. The week also marked a major milestone for the company – with its user base crossing 200 million wallets within just three years of launching the Paytm Wallet.

Until now, Amazon seemed to be the only threat to the homegrown unicorns. However, Alibaba’s entry into India marks a new chapter in India’s startup ecosystem.

While Sachin Bansal tried to lobby against “capital dumping” and for regulations against foreign players like Amazon – in the battle to conquer India’s ecommerce market, will a troubled Flipkart be able to stand against Amazon and Alibaba’s war chests? With this proxy war between the two global biggies on one end and with its payment wallet taking off on the other, it looks like Paytm might just be the one to walk away with the biggest piece of the pie!

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.