Paytm Heats Up The Ecommerce Space: Readies $500 Mn Treasure Trove To Acquire Startups

Indian mcommerce player, Paytm, has readied a $500 Mn warchest to battle out with the other players in the space.

The company will be using the money to acquire hyperlocal startups and improvise on their logistics. Alibaba backed Paytm is expected to focus on establishing a foothold in the ‘local commerce space’.

The company is also betting huge on the offline-to-online business category which is often touted as the next big thing in the ecommerce industry.

Vijay Shekhar Sharma, revealing the breakdown of the investment said, “We have about $200 Mn in cash and the remaining $300 Mn could be through equity.”

He further added that they have kept aside $50 Mn for investing in logistics and warehousing.”

Paytm has also applied for  payment banking permit and is said to expand aggressively in the ecommerce space while maintaining a focus on the offline to online (O2O) businesses. The latest infusion of funds will also fuel Paytm’s acquisition drive wherein they are eagerly eyeing the food-ordering and grocery ordering apps.

The O2O platform will help Paytm in bringing the brick and mortar customers online as “buy online pick offline” seems to be the latest rage. The fact that India’s Internet market is all set to become one of the fastest- growing in the world, with the size of $137 Bn by 2020 as per reports from Morgan Stanley is fuelling growth of the ecommerce businesses. Estimates from consulting firm AT Kearney pegs the Indian ecommerce market at a staggering $1.3 Tn by 2020. Earlier, Paytm had raised more than $200 Mn from Alibaba Ant Financial services after trading in stakes totalling 25%.

According to reports by ET, Alibaba group might invest an additional $600 Mn in Paytm in return for another 20% stake. The new round of funds would spike up Paytm’s valuation to nearly $3.7 Bn, which is almost a 4X increase over the previous $1 Bn.

Just today, Paytm has announced that it has crossed 100 Mn mobile wallet users.

Editors Take

The ecommerce space in India is bustling with activities so much so that companies are struggling to find the next set of customers. Biggies like Flipkart, Snapdeal and also Paytm are prepping themselves to bring the next set of customers onboard. The O2O approach is one of their safest bet and if they play the cards right, they can surely rake in customers.

Majority of high grossing ecommerce companies are getting armed with huge warchests and this is a sign of blooming business. Customer acquisition not only plays an essential role at this juncture, but it also burdens the company in terms of high burn rate, the impact of which can be reduced with  freshly earmarked money.