one97 communications / payments bank / paytm / alibaba

Post demonetisation, digital payment provider Paytm has been on a roll already. But we aren’t here to talk about its payment division but the e-commerce one, which is adding fresh capital to its coffers. Chinese e-commerce behemoth Alibaba, who is already its biggest stake holder, is planning to lead a massive $200 million funding round into Paytm’s e-commerce entity. While the deal has not been made official yet, reports suggest that it will be announced in coming weeks.

People aware of this development says that this deal will also mark the formal entry of the China-based eCommerce company in India. With this, Alibaba will be competing against US-based Amazon and homegrown Flipkart.

Alipay, which is the payments affiliate of Alibaba, along with investment firm SAIF Partners, have participated in the new fundraising deal which is expected to value the online marketplace at over $1 billion. With this new investment, the combined entity of Alibaba and Alipay will now be owning more than 50 percent of the company.

Note that Paytm’s parent company — One97 Communications had spun out the e-commerce business into a separate entity. This new entity will either be named PayTM Mall or PayTM Bazaar. As per estimates, the business has annualized gross merchandise value (GMV) of nearly $1 billion.

For Alibaba, entering the Indian market will mark an expansion of its global footprint. It will also offer a chance to grab a slice of one of the world’s most attractive and largest markets for online retail, which was worth around $14 to 16 billion at the end of 2016, up from about $11 billion in 2015.

It seems to be clear now that Alibaba will be working under the Paytm brand in India. Earlier, the company was expected to begin its own business in India as TMall  — its business-to-consumer brand in China. Paytm is now expected to spin off the e-commerce business into a new mobile application and a separate website this month. Also, Alibaba now has an advantage in the B2B sector as there aren’t too many competitors.

This new transaction also marks the completion of the reorganization of One97 into two distinct units — the payments bank Paytm Payments Bank Limited, and online marketplace Paytm E-commerce. The process was started in February last year, and completed in August.

One97 Communications was valued at over $5 billion the last time it raised about $60 million from new investor Mediatek last year. For its revenues, the e-commerce entity makes up about 20 percent of One97’s business.

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