Alibaba re-ups in India’s Paytm

Financial terms weren't disclosed, but The Economic Times reported that Alibaba has paid $680 million for a 20% interest in Paytm, which in turns lowers Ant Financial's stake from 25% to 20%. Ant Financial acquired a 20% holding from Paytm's parent company - One97 Communications - in February in a deal said to be worth $550 million.

Ant Financial said it has been working on synergies with Paytm since that intitial investment. The company operates Alipay, a third-party payment platform with more than 300 million users in China. There are a further 190 million users on Alipay Wallet, the mobile app version of Alipay.

The new capital will be used to expand Paytm's mobile commerce and payment services in India, as well as invest in marketing, technology and recruitment.

Headquartered in New Delhi, One97 has more than 1,200 employees with branch offices in five Indian cities and a presence in Africa, Europe, the Middle East and Southeast Asia.

Founded in 2000, the company originally provided value-added services to Indian mobile operators. As the business expanded, subscription-based content was introduced. Paytm followed in 2009-2010, initially as a mobile recharge and utility bill payment platform, before moving towards a marketplace model.

Its online platform allows users to loan money onto their handsets from a licensed company in order to make payments, but not withdraw money. Paytm claims to have more than 100 million "Paytm Wallet" users who carry out over 75 million transactions every month.

SAIF Partners and Silicon Valley Bank (SVB) committed $8 million to One97 in 2007, according to AVCJ Research. Intel Capital, Reliance Capital and SVB put in $15 million in 2009, with SAIF investing $10 million the following year. SAP Ventures put in $10 million - classified by One97 as the Series C round - later in 2010.

Last month, One97 Communications spun off Paytm into a separate entity under One97's co-founder Shekhar Sharma. One 97 will own less than 40% of the company, while Sharma will hold 51%. This arrangement complies with regulations that require majority ownership by an Indian promoter.

"India is an important emerging market with strong e-commerce potential, and we look forward to partnering with Paytm to deliver innovative products and services to consumers," Daniel Zhang, CEO of Alibaba Group, said in a statement. "This investment will further expand Alibaba Group's global footprint to India's thriving mobile commerce market."

India's e-commerce revenues have risen from INR400 million in 2009 to INR3.5 billion in 2014, and they are projected to reach INR6 billion this year. Electronic payments are increasing in parallel.

According to the Reserve Bank of India, there were over 144 million mobile banking transactions in 2014, more than seven times as many as when the bank first began tracking them in 2011. The financial value of these transactions rose from INR14.1 billion to INR665.7 billion over the same time period.

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