One97
Communications, which runs mobile payment and ecommerce platform Paytm, is in
advanced talks to raise fresh funding of about Rs 2,000 crore ($300 million)
from Taiwanese semiconductor maker MediaTek, Goldman Sachs, Singapore's Temasek
and other investors, according to two persons with knowledge of the
development.
This round
will see Paytm's valuation more than doubling to $5 billion.
Existing
investors, which include Alibaba and its payments affiliate Alipay besides
venture capital firm SAIF Partners, will also be participating.
"The
new round is expected to value the company at close to $5 billion," said
one of the people cited above. The money will be deployed across all of Paytm's
businesses -digital payments, online marketplace and the upcoming payments
bank," the person said.
Paytm was
valued at $2.3 billion in the last round of capital infusion in June.
Paytm
E-commerce Pvt Ltd, set up earlier this month, will house the marketplace and
is expected to initially mirror parent One97's shareholding. This unit is also
expected to become the launchpad for Alibaba's online operations. The Chinese
company's business-to-consumer site Tmall is expected to make its India debut
in six months.
Founder
Vijay Shekhar Sharma, who holds the payments bank licence in his personal
capacity, has established Paytm Payment Bank to house the financial services
business.
The arm's
CEO Shinjini Kumar and Ash Lilani, whose investment firm Saama Capital is an
early Paytm backer, are on the board of this entity. The bank is likely to be
launched in October.
ET was the
first to report on Paytm's plans to spin off its ecommerce business and raise
fresh capital in its March 21 edition.
The new
round of financing comes after Alibaba and Alipay invested a total Rs 4,400
crore in 2015, according to Registrar of Companies (RoC) filings. Paytm has
said it raised about $675 million from Alibaba and Alipay.
ET could not
ascertain the cash split between the payments bank and commerce business. Paytm
did not reply to a detailed email questionnaire sent by ET and multiple calls
made to its spokesperson. There was no response to emails sent to MediaTek,
Goldman Sachs and Temasek.
If the deal
goes through, it will be the largest financing round in India's broader
technology and internet space this year, going past the $200 million raised by
online marketplace Snapdeal and $150 million by grocery retailer Bigbasket.
Last year saw several bumper rounds with cab hailing app Ola getting $900
million, Flipkart raising $700 million and Snapdeal getting $500 million.
But in the
last 10 months, investor sentiment on the broader tech and internet ecosystem
has turned cautious. Snapdeal and Flipkart have found it hard to raise capital
at their existing valuation, according to multiple sources directly involved in
these talks, with the latter also seeing a series of valuation markdowns by
mutual fund investors.
What helps
Paytm in raising capital is that it has established market leadership in
consumer payments, while ecommerce companies like Flipkart are under constant
threat from US rival Amazon, according to analysts.
"In the
payments space, they (Paytm) have a big lead and an edge in terms of execution
on the ground," said Forrester Research analyst Satish Meena.
"They
are tapping the next 100 million customers, while other mobile wallets are
pushing their services to the same top 50 million customers by offering
cashbacks."
Paytm rivals
in payments include Mobikwik, which recently raised $40 million from South
Africa's Net1, and Snapdeal-owned Freecharge, which has been looking to raise a
$150-300 million round since October 2015. Flipkart is also expected to launch
its mobile payments business under PhonePe next week, and plans to invest $100
million initially.
Total
payments through digital instruments is expected to reach $500 billion by 2020
in India, according to a study by Boston Consulting Group, with customer
payments to merchants driving growth.
Paytm has
been pushing its offline to online business aggressively over the last 12
months, entering areas like movie ticketing, petrol pump payments, taxi
payments and education fees among others.
This is
expected to be key drivers in monthly gross merchandise value (GMV) increasing
to $500 million by December from $300 million in July, Sharma told ET in an
interview earlier this month. Sharma had also said that Paytm is running at a
1% operating loss, which includes online marketing, payment gateway and
cashback costs.
According to
RoC filings, One97's losses swelled to Rs 1,534 crore in the year ended March
from Rs 372 crore in FY15. This would mean that its average monthly cash burn
was $19 million as it spent aggressively to build a mobile wallet customer base
and launch an online marketplace after first raising capital from Alipay in
February 2015.
As of now,
Sharma holds 21.33% stake in One97 and its earliest venture capital investor
SAIF Partners has 30.81%. Alibaba holds 8.53% while Alipay is the single
largest shareholder with a 32.41% holding.
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