After speculations of SoftBank looking to secure a stake in Flipkart, it is turning to India’s leading digital payments giant Paytm. The Japanese giant is said to be planning to pump nearly $1.2-1.5 billion in cash into the heavily Alibaba-backed company. The deal could see Paytm’s valuation skyrocket to $7-9 billion, according to people aware of the matter.
It is being said that the deal has been in the works for nearly three months now. It will see SoftBank buying some shares from existing Paytm investor SAIF Partners and founder Vijay Shekhar Sharma in exchange of monetary investment in the company.
If the investment deal goes through, the fund infusion could be one of the largest investments by a single investor in an Indian start-up. It would also make SoftBank Group Corp one of the largest shareholders in Paytm, definitely after Alibaba and its affiliates.
Getting SoftBank on board as a large shareholder could enable Paytm to reduce the control of China’s Alibaba Group Holding Ltd. It could also help the company in preventing possible government concerns about a Chinese company having a strong hold over Paytm.
Citing people aware of the development, the LiveMint report states:
Getting SoftBank will help Paytm change the perception of being a Chinese company with the regulators as well as the public.
For SoftBank — the world’s biggest investor in start-ups, an investment in Paytm means an entry into India’s huge financial services market. The proposed deal with Paytm is another instance of SoftBank trying to get it right the second time.
If you are not aware, the Japan-based venture capital firm initially considered investing in Paytm back in late 2014 but passed on the opportunity. It instead bet on online marketplace Snapdeal. At that time, Paytm was rapidly expanding its commerce business which SoftBank was opposed to because of its Snapdeal investment.
Paytm is currently India’s second-most valuable Internet firm. There has been speculation that the company may also buy Snapdeal-owned payments firm Freecharge, though the fundraising is not related to the proposed buyout.
One97 Communications, the parent company of Paytm, was valued at around $5 billion in August when the company raised a fresh $60 million from leading mobile chipmaker Mediatek. It saw a valuation of close to $6 billion in March when three existing investors— Reliance Capital, SVB (Saama Capital) and SAP Ventures — sold their combined stake of about 4.3% to Alibaba and Ant Financial.
