Competition among India's e-retail industry is about to become red hot with Chinese e-commerce giant Alibaba Group Holding leading a $200 million investment to help launch Paytm's e-commerce business into a separate company, according to media reports.
The deal values Paytm's e-commerce business, which currently makes about 20 per cent of its parent One97 Communications's revenue, at about $1 billion, Mint reported. The e-commerce business will be spun out into a separate entity called 'Paytm E-Commerce.'
The entity will operate as 'PayTM Mall,' named after Alibaba's T-Mall in China, or 'PayTM Bazaar' with a new site and an app, Economic Times reported citing sources. The business has an annual gross merchandise value of about $1 billion.
Paytm's parent One97 raised $60 million in mid-last year from Mediatek, its last funding round when it was valued at $5 billion. Alibaba and Ant Financial will have a combined 50 per cent stake in the new division after this deal, according to Mint. Alibaba's payments affiliate Alipay and venture capital firm SAIF Partners, are also investing in the deal.
With this deal, e-commerce competition in India is set to further heat up that has been dominated by homegrown brands Flipkart and Snapdeal, and e-commerce giant Amazon. The e-commerce industry in India is expected to grow to about $55 to $60 billion by 2020, according to estimates by AT Kearny and Google. The market was worth about $14 billion to $16 billion at the end of 2016, ET noted.