one97 communications / payments bank / paytm / alibaba

As reported yesterday, Paytm parent One97 Communications is looking to raise a massive $350 million at a valuation, which is double as compared to the previous fund raise. And reports today suggest that the company has received a commitment of atleast $60 million investment from Taiwanese chipmaker MediaTek’s Mountain Capital fund.

Commenting on the same, Paytm CEO Vijay Shekhar Sharma says,

With long haul investors, Paytm is in an incredible position to provide a new paradigm of banking and financial services. Even without this capital, we were sitting on a runway of 36 months.

This massive investment would mark the Taiwanese chipmaker’s entry as an investor in Paytm. A person close to the development told VCCircle that Mountain Capital is expected to be the lead investor in this funding round. Existing investor, Alibaba is also expected to put in atleast $60 million in the company.

In addition to these, the payment solutions earliest backer SAIF Partners and Alibaba’s payment arm AliPay are also expected to participate and supply the remaining of the $300 million funding amount. There is also a rumor that other new investors — Taiwan-based Foxconn, Goldman Sachs and Singapore’s sovereign fund GIC Pte — could also participate in the ongoing funding round.

Paytm is issuing new shares to investors at about $99(Rs. 6,650) for this funding round. This total adds upto a staggering valuation of about $4.8 billion(Rs. 32,250 crore). This fund raise has been ratified by the board of directors of the company on Monday, and the deal is expected to be finalised in the coming 1 to 2 months. Paytm is expected to employ most of the funds acquired to setup its spin-off e-commerce marketplace.

This transaction also underlines a significant jump in valuation, when compared to a recent disposal of shares to three new board members — Naveen Tewari(co-founder of InMobi), Neeraj Arora(global business head, WhatsApp) and Ruchi Sanghvi(Engineer at Facebook). According to recent filings with the Registrar of Companies, Paytm had issued Rs. 85 lakh worth of shares, at Rs. 3,300 each. This valued the Paytm parent One97 Comm. at about $2.3 billion or Rs. 15,260 crore.

Prior to this round, Paytm had raised $680 Million in a funding round led by Alibaba and its financial arm Ant Financial. This had bumped up Alibaba’s 25 per cent stake in the digital wallet service provider Paytm close to 40 per cent. And after the completion of this funding round, one could expect complete supremacy of the Chinese e-commerce behemoth over the e-commerce subsidiary of One97.

Paytm is looking to raise over $350 million in this funding round. But until now, we’ve only accounted for the $300 million that the company will receive from existing and new investors. The rest $50 million are reportedly being added by the secondary sale of shares to aid CEO Sharma finance his part of the investment in the payments bank. The payments bank business of the company is expected to launch operations this October.

The investment from MediaTek will also hold a strategic partnership clause in the deal, that will help Paytm expand its distribution network by pre-installing its application on smartphones powered by MediaTek’s chipset.

Mediatek comes with a lot of clout on mobile platform at the hardware, which is what we needed for our next level of growth,

said Sharma.

With the freshly infused funds, the company is reportedly also eying expansion outside India in the Western Europe and U.S. markets. And with most of the funds being dumped into the independent e-commerce business, it could help Alibaba gain a strong foothold against existing competitors Amazon and Flipkart. Alibaba has recently also expressed interest in acquiring another Indian e-commerce firm Shopclues.


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