Alibaba Group Holding Ltd.'s finance arm is buying a 25 percent stake in One97 Communications Ltd., which owns the popular mobile payment app Paytm, to tap into India's fast-growing e-commerce sector.
The companies did not disclose the amount of the investment. However, news reports suggested that Zhejiant Ant Small & Micro Financial Services Group might initially pay around $200 million for the stake, followed by another $375 million in tranches based on the firm meeting performance milestones.
“With over 1 billion people, India’s payments market has vast untapped potential,” Cyril Han, vice president of Ant Financial, said in a statement. “Paytm, as a leader in this field, is best equipped to build a mobile-payments ecosystem in the country.”
This is Ant's first investment in an Indian company. Paytm, which has 23 million users, will use the funds to further expand its mobile presence. The deal was expected after speculation became rife earlier this month.
SAIF Partners invested $10 million in the latest round to maintain its stake at 40%. One97 founder and CEO Vijay Shekhar Sharma said he and SAIF will continue to remain majority shareholders and ruled out a sale of the company.
Paytm currently handles 8-12 lakh daily transactions on its mobile platform and processes about 25 million orders a month. One97 has also aplied to the Reserve Bank of India for a payments bank licence to start basic savings, deposit, payment and remittance services to customers. When it was first started in 2010, Paytm had prepaid mobile recharge and bill payment services. Then it added a wallet service, and last year launched a full marketplace on its mobile app.
Jack Ma, Alibaba's billionaire founder, is looking to expand to more countries after raising a record $25 billion in an initial public offering in September. With growth slowing in its home market of China, India presents a growing opportunity.
Softbank, which has a 32 percent stake in Alibaba, also owns 33 percent stake, worth $602 million, in Indian e-commerce firm Snapdeal.
Alibaba has its own mobile payments platform called Alipay Wallet, which has over 190 million users, according to a company statement. Ant Financial is worth about $50 billion and plans to go public next year, according to reports.