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In a rather unsurprising, anticipated move, one of India’s most noted and valued tech startups Paytm, is looking to raise $400 million by June to set up the new, proposed Payment Bank, the Paytm Payments Bank.

Sources close to the matter have told TechCrunch, that the amount is close to $400 Million with the new payments bank getting into a separate entity, as already announced by One97 Founder Vijay Shekhar Sharma earlier. He will own a controlling 51% of the overall payments bank stake, which is a must as per RBI guidelines, while the rest is expected to be given to the parent company.

Earlier in November last year, Sharma had hinted at diluting 1 percent of his own stake to the parent company One97 Communications Ltd. He had said, that the plan is to infuse between $25 million and $50 million of capital into the bank until operations become profitable. As of now, Sharma owns 21% stake in the parent company.

Vijay Shekhar Sharma, had said –

We will go to the market post-Diwali and tap current investors, banks as well as financial institutions for funding. The stake dilution will be less than 1%. We are figuring out whether we require more funds.

Founded in 2010 and owned by One97 Communications, Paytm currently has over 100 million mobile wallets across India, mainly used by consumers to buy goods in its marketplace. The service also allows users to recharge their mobiles, pay bills and make bank transactions.

The company has so far disclosed $700 million in funding from investors that include Alibaba. In August last year, when Paytm raised a whopping $680 million from Alibaba affiliate Ant Financial, the company saw its valuation soaring as high as$2.8 billion.

Paytm’s attempt at raising new capital comes in just when the Internet was popping up with news about Paytm and Flipkart considering to partner up to take over not only global market leaders like Amazon, but also local rivals like Snapdeal.

Reports have also pointed towards a possible partnership of sorts between Paytm’s and Flipkart’s marketplaces as both look to tackle local and global competitors. An option being considered, also includes merging of Paytm and Flipkart marketplaces to form one, unified online shopping destination.

Early talks have been about creating a structure where the marketplaces of Paytm and Flipkart could be combined,

a person directly familiar with the early talks told TechCrunch earlier this month.

Amazon has been giving a tough time to not just Flipkart or paytm but the entire local ecommerce lot as a whole, as it continues to pump in more and more cash into its Indian arm. On the same note, Flipkart — the largest etailer in the subcontinent by all possible metrics — has been finding it difficult to raise new funds at its current valuation.

Apparently the decision for Paytm to raise more money was taken earlier this month in Hangzhou, China when Sharma attended a company board meeting. The fresh funding will be utilized for the setting up and expansion of the new bank. This will potentially help Paytm expand payment services to more third-party apps and platforms which do not have banking licenses.

These developments become all the more interesting in lieu of Paytm’s payments business turning profitable. This could be one of the governing reasons of investor attraction towards Paytm’s payments bank, considering that investors will bank upon Sharma’s success in the digital payment space.

Paytm can credit a large part of its success to its core, payments business that brought in over 60 percent of its  annual gross merchandise value of $3 Billion. The performance from the e-commerce department meanwhile, didn’t quite match expectations — but that’s not particularly surprising considering that most virtual retailers found themselves in a similar situation at the end of 2015

Vijay Shekhar Sharma, founder of Paytm, will own 51% of the new payments business while the company will own 49%. This was all decided during the board meeting where the capital raising was planned. He believes that the new payment methods will attract investor attention and in turn, increase Paytm’s valuation significantly.

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