At $5 billion, Paytm is close to Flipkart in value

Alibaba buys back less than 1% stake held by Reliance Cap in the e-commerce company for $41 million

China’s top e-commerce player and lead investor in Paytm, Alibaba, has bought a marginal stake held by Reliance Capital for $41 million. While the deal has meant a 27-fold return for the Anil Ambani-led firm, it has lifted the valuation of One97 Communications, the parent company of Paytm, to an estimated $5 billion at a time when the e-commerce universe is facing severe markdowns.    

Reliance Capital had acquired less than one per cent stake in One97 Communications for $1.51 million in 2009.  

With this, the Paytm group has risen to the second position in the e-commerce valuation pecking order, if only companies with Indian founders are counted. Flipkart, whose valuation had risen to more than $15 billion a year ago, has gone through several markdowns. The latest markdown by Morgan Stanley pegged Flipkart’s valuation at $5.39 billion. Another prominent online player — Snapdeal — was till a year ago valued at around $6.5 billion, but the company is learnt to be in talks to raise capital at a valuation lower than $4 billion. 

Both Paytm and Reliance Capital did not divulge any details of the deal. But sources said everything was finalised late Monday evening. 

Reliance Capital has still retained a stake in Paytm e-Commerce, which it had got free of cost by virtue of its investment in the parent firm, sources said. One97 Communication as well as its two subsidiaries — Paytm Payments Bank and Paytm Marketplace — had turned unicorn (valuation of $1 billion or more) recently. The group’s valuation last year was estimated at around $3 billion.

Earlier, Reliance Capital had said it would trim its proprietary investment portfolio as part of its plans to monetise non-core assets.

Paytm is one of the few companies which has managed to insulate itself against the downturn that has hit the e-commerce sector. The company has not only managed to raise funds, but is now the sole company tech major Alibaba is using to make an entry into India. 

Alibaba Group Holding Ltd recently infused around $200 million in funds into Paytm E-Commerce in an investment at an estimated valuation of $1 billion. 

Sources said that this funding is however just the beginning. In 2018, Paytm could raise as much as $1 billion in the next round of funding, another source said.