This values the company at a mere ₹100 crore, plunging from $3 billion, the valuation the Vijay Shekhar Sharma-led company fetched in its last fundraising that was in 2020.
Paytm Mall, inspired by Alibaba’s T-mall in China, raised $200 million in its first funding from Alibaba at about $1 billion in 2017. In total, the company raised more than $800 million from Alibaba, Ant Financial, SoftBank, Elevation Capital (earlier SAIF Partners) and eBay.
Paytm Mall spokesperson said, "We are focused on our transition to build a sustainable business in partnership with ONDC and are excited about the future of e-commerce in India. As part of the shift in the business direction of the company, PEPL also saw the exit of early investors. The exit price of any investor(s) in the company via capital reduction process is not reflective of the valuation of the company and neither does the exit have any link to any FDI laws. One simple metric is to consider that our cash balance itself is significantly higher than the quoted number in media reports, which establishes that the suggested low Fair Market Valuation is completely inaccurate."
Paytm E-commerce has proposed reducing the company’s equity share capital and securities premium account and said it would hold an extraordinary general meeting on 23 May.
“Despite investing significant amounts of capital in growing its business and expanding market share, the company suffered operational losses. Given that the online business space is evolving rapidly with the onset of unique business models, changing technologies and new regulations, it is expected that additional capital and efforts will be required to be committed. The sector continues to be highly competitive and is marketed by the presence of several large competitors. Finally, the ongoing pandemic has thrown up unique challenges for different businesses, and the company has also had to deal with declining market economics and demanding circumstances that impose continuous pressure on financial metrics," the company said in an EGM notice reviewed by Mint.
“Against this backdrop, the specified shareholders (Alibaba and Ant Financial) have expressed their desire to exit their investments in the company," it said.
“The company has resolved to pursue the path of a capital reduction, to extinguish equity shares and pay surplus cash to the specified shareholders. Upon completion of the capital reduction, the company will have the right balance of the capital and shareholders, to build a path of revival and growth on a new trajectory," it said.
On 15 May, Paytm E-commerce announced that it would pivot to Open Network for Digital Commerce (ONDC) as its primary focus and explore opportunities in the exports business in place of traditional physical goods e-commerce. “As part of the shift in the business direction of the company, Paytm E-commerce also sees the exit of early investors Alibaba and Ant Group."
ONDC is touted as the UPI of e-commerce and the new Amazon and Flipkart challenger. “It is still very early days, so investors don’t know what to make of it," a senior industry official said.
Paytm Mall, which was always seen to be struggling with its business plan and positioning in the market, announced several pivots in the past. During FY2021, the company posted revenue of Rs419 crore and Rs504 crore in losses.