Paytm valuation jumps to $1.5 billion

Alibaba to pick up 40 per cent for $575 million, SAIF Partners infuses $50 million

Paytm, a mobile wallet brand owned by the Noida-based One97 Communications, has been valued at $1.5 billion (over Rs 9,000 crore) in the latest round of fund infusion by Chinese e-commerce company Alibaba and existing investor SAIF Partners, together worth $625 million.

On completion of this round, the valuation of the company will cross $2 billion, making Paytm India's most valued Internet-based venture after Flipkart, which is now pegged at $11 billion. Paytm was valued at $250 million in 2011.

Last year, Snapdeal received funding from Japan's SoftBank at a valuation of $1 billion. Info Edge, JustDial and MakeMyTrip are valued at around $1.7 billion, respectively.

"Alibaba through two of its entities is investing $575 million at a valuation of $1.5 billion. SAIF Partners, which already has investments in the company, will be putting in $50 million," Vijay Shekhar Sharma, chairman and managing director of One97 Communications, told Business Standard.

Alibaba and its payment unit Alipay together would have close to 40 per cent equity holding in Paytm once the investment of $575 million was completed, said Sharma. The first tranche of funds will come in this month and the rest over the year. In the first tranche, Alibaba will invest $200 million.

Sharma's equity holding in Paytm will come down to 22 per cent from 35 per cent. SAIF Partners, which has about 50 per cent equity in One97 Communications, will hold 33 per cent in the company after the fresh infusion of $50 million. SAIF Partners will continue to be the single largest equity holder in Paytm. The remaining equity is with minority shareholders, including Reliance Capital, Silicon Valley Bank and employees. These holdings will be diluted after the deal.

Paytm's parent firm had raised $30 million from SAIF Partners, Intel Capital, Silicon Valley Bank and SAP Ventures among others since 2007. In 2010, the company had filed for an initial public offering but shelved the plan after receiving regulatory clearance.

"With this round of funding, we are financially sorted for the next four to five years," Sharma said. The money will primarily be used in strengthening the technology backbone, customer acquisition and entry into new categories. Paytm is also exploring new markets such as Singapore, which will be the gateway to other Southeast Asian markets. Sharma said Paytm's focus would be on strengthening the mobile commerce platform, where it works as a marketplace for merchants to sell products. Since its launch last year the mobile commerce platform has about 10,000 offline and 16,000 online merchants registered. "By end of this year, we target to have 100,000 merchants on our platform," he said.

"We plan to bring Chinese merchants on our mobile marketplace. They are already there on Alibaba and we can easily use the existing network for our expansion," Sharma added.

Paytm aims to have 100 million mobile users by 2016 from 20 million now. "We are targeting $2 billion in revenue by the end of December this year," said Sharma. Paytm has an annualised transaction value of $750 million, earning 1-1.5 per cent of payments as transaction fee. In the mobile commerce business it earns transaction fees of up to five per cent.