New Delhi: Paytm has received board approval to raise an additional $375 million from a unit of existing investor Alibaba Group, having exceeded the performance targets set by the investor for disbursal of funds.
The transaction will value the online payments processor and marketplace at $1.83 billion, making it one of India’s four most valuable Internet start-ups. Paytm, owned by One97 Communications Ltd, is likely to receive the money within the next six months, according to two people familiar with the discussion. The deal will increase Alibaba unit Ant Financial Services’ stake in the company to 41%.
According to official documents filed by Paytm with the registrar of companies (RoC), the allotment of shares in the latest tranche of fund-raising needs to be completed within 12 months of the board passing the resolution approving it. The deal is subject to approval by Ant Financial.
Alipay Singapore E-commerce Pvt. Ltd has already pumped $200 million into Paytm in two tranches of $65 million and $135 million for a stake of 25.88%, according to documents filed with the RoC.
In October 2014, Alipay Financial services rebranded itself as Ant Financial Services.
The $1.83 billion valuation assigned to Paytm will vault it to a place among India’s most valuable Internet start-ups, alongside e-commerce marketplaces Flipkart and Snapdeal and taxi hailing company Ola.
The most recent tranche of $135 million funding came by the end of April, the RoC documents show. Paytm also received close to ₹ 1 crore from Ratan Tata’s personal investment firm RNT Associates Pvt. Ltd.
“Paytm has already surpassed the business targets set aside for it," said one of the two people mentioned above. Both requested anonymity.
In March, Mint reported that the biggest chunk of the $575 million equity committed to Paytm by Ant Financial was subject to certain clauses, including achieving certain performance milestones by Paytm and also a commercial agreement that maps the way the two companies will collaborate in the country. Paytm did not comment on the deal. Co-founder Vijay Shekhar Sharma said, “We see a long-term partner in Alipay and together we are aiming to get a dominating marketshare in the mobile payments and commerce space."
While Paytm has the option of looking for a better deal from other investors, it is looking to stick with Ant Financial, said the two people mentioned above. The company is also working very closely with the Chinese company to get some of the small and medium sellers from China to list in India on Paytm’s platform, said one of the two people.
“When a strategic investor steps in, you tend to go with the strategic partner for follow-on rounds," said Vineet Toshniwal, managing director of Equirus Capital, an investment bank.
“Alipay wants to replicate the Alibaba story in India and it is a strategic player with very deep pockets which will pump in as much money as it can to make sure the investee company is a market leader," he added.
According to industry experts, it is also very difficult for Paytm to find a better investor at this juncture.
Separately, Paytm has appointed Yijie Peng, also known as Sabrina Peng—Alipay International president—and Jing Xiandong, also known as Eric Jing—chief operating officer at Ant Financial—directors of One 97 Communications Ltd.
Paytm has crossed its operating plan of having 50 million digital wallets on its platform. Digital or virtual wallets act as holders of cash that reside in a mobile device or personal computer and can be used to purchase goods and services online. These can be loaded with cash through a mobile payment provider, online banking or through telecom operators
The company currently has more than 66 million wallets and expects the number to cross 100 million by December. In April, Paytm said that it is looking to cross monthly annualized sales of $4 billion in gross merchandising value (GMV, or price of goods sold) by December, with nearly half of it coming from its marketplace business.
Paytm has 30,000 merchants on its platform and is expecting to touch close to 100,000 by the year-end after it allows zero-commission listings. Noida-based Paytm is also backed by venture capital firm SAIF Partners, which currently holds close to a 37% stake in the company.