Paytm Mall completes $450 million funding round from Softbank and Alibaba

Flipkart and Amazon should pay close attention. The two-way race to the top in India’s e-commerce market could soon be crashed by a third contender.

Paytm Mall, the e-commerce arm of the country’s payments upstart Paytm, has reportedly closed the final round of a $450 million (₹30 billion) cash infusion from its international backers, Softbank and Alibaba.

The investment, which was announced in April 2018, was completed in four tranches, with ₹26 billion coming from Softbank and the remainder from the Chinese e-commerce giant. As a result, Softbank now owns a 21% stake in the business while Alibaba has a 46% stake.

The funding round, which comes soon after Softbank agreed to sell its shares in Flipkart to Walmart, is said to value Paytm Mall at as much as $2 billion. While this is still a far cry away from the enterprise value of Flipkart and Amazon’s Indian business, it is by no means insignificant.

Ambitious growth plans

Paytm Mall commenced operations in early 2017 with a $200 million investment from Alibaba. According to a blog post in April, it extended its reach to 700 towns and 19,000 zip codes within its first year of business.

The company has ambitious growth targets, and it will use its newly-bolstered finances to try and achieve them. After closing fiscal 2018 with a gross merchandising volume (a measure of total sales) of $3 billion, it plans to triple this figure to $10 billion this fiscal year.

Given that Paytm has no inventory of its own, it primarily facilitates the online sales of offline businesses. This year, it also plans to ramp up its focus on offline store partnerships, given that 60% of its online sales come from offline stores. It has ties with around 75,000 of these stores, and plans to onboard twice as many stores to its portal by 2019.

To enable these stores to sell online, Paytm will offer them devices for invoicing and inventory management as well as insurance on these devices. Its Point of Sale (PoS) technology will be gradually rolled out across its retail partners over the course of this year. The cloud-based technology allows shopkeepers to manage orders, get real-time data on inventory and sales and bill customers.

The Indian e-commerce market is expected to record $33 billion in sales this year, eventually reaching $72 billion by 2022. These figures could actually be much higher if Paytm Mall makes good on its growth plans.
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