Alibaba, the world's biggest and most valuable e-commerce firm, has finally moved to pitch its flag in India.
An Alibaba affiliate, Ant Financial Services Group, said on Thursday it had signed a deal to buy a 25% stake in Indian mobile payments and e-commerce platform Paytm owner One97 Communications.While both sides did not reveal financial details, three sources familiar with the deal said Ant would initially pay around $200 million for the stake and stump up $375 million more in tranches based on the firm meeting performance milestones.
ET had last month reported Alibaba was in talks to buy into Paytm, heralding the Chinese firm's indirect entry into a market potentially as big as the one back home. The deal seeks to effectively pump money into Delhi based Paytm -India's largest mobile commerce platform with nearly 25 million orders a month and more than 23 million mobile wallet users -will close in the second quarter of this year. Paytm offers recharges, tickets and deals besides hosting an integrated marketplace where it hands out bargains to shoppers purchasing clothing, shoes, accessories and other goods.
Alibaba is the last of the global ecommerce biggies to set up presence in India's red-hot marketplace for online shopping. Its global peers Amazon and eBay already have sizeable Indian operations.
Sources close to the transaction said the latest deal tranche valued One97 at around $800 million and the valuation could rise to as much as $1.5 billion with the subsequent fund infusions pegged to performance milestones.
SAIF Partners' invested $10 million in the latest round to maintain its stake at 40%. Other investors in One97 include Intel Capital, Sapphire Ventures and Silicon Valley Bank and their holdings were not immediately known.
The deal represents Alibaba's first-ever investment in an Indian company , and highlights the growth potential of India's digital payment sector. India is the fastest growing smartphone market in AsiaPacific, according to IDC. This exponential growth in smartphone adoption has also led to a growth of India's online payments industry which has surged at around 50% annually over 2007 to 2014.
The entry of Alibaba could potentially alter India's ecommerce market that is now dominated by Flipkart, Amazon and Snapdeal and see another entrant armed with cash and muscle join the battle for the attention of a growing online consumer base. It also marks the continuation of big ticket investments in the eretailing sector, which dominated startup fund-raising activity in 2014.
The deal with Alibaba will help Paytm build the payments ecosystem in India. It will use the funds to grow its mobile payment business and its commerce user base. Funds will also be used for improving technology for mobile operations, a platform for aggregating courier companies to ensure deliveries countrywide, customer acquisition and marketing activities. Paytm has recently applied for a payments bank permit with the Reserve Bank of India.
Han said that Ant has run a similar business in China for over 10 years and has a lot of experience which it can share with Paytm, besides helping it enhance user experience and control and manage risks.
Alipay, a third-party payment platform under Ant Financial Services Group and a related company of Alibaba Group, provides payment services for Alibaba Group's marketplaces as well as third-party websites and merchants. Alipay is the most widely used payment provider with more than 300 million users in China and 190 million users on Alipay Wallet, the mobile application of Alipay . Paytm also plans to add 3,000 employees to its current headcount of 2,000 and take on more office space in Delhi and Bengaluru.
No comments:
Post a Comment