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Valuation of Paytm, arm together set to top $20bn.

Date: 28-03-2019
Subject: Valuation of Paytm, arm together set to top $20bn
Bengaluru/New Delhi: Mobile payments company Paytm, along with its e-commerce affiliate Paytm Mall , is putting together a new round of financing, which may see both the companies raise about $2 billion, taking their combined valuation to over $20 billion, according to two sources briefed on the matter. Both companies are promoted by Delhi-based technology entrepreneur Vijay Shekhar Sharma and are backed by Japan’s Softbank , Chinese e-commerce giant Alibaba  and venture capital firm SAIF Partners. 

The flagship business Paytm  is expected to be valued at $18-20 billion as it is raising a new round of $1-2 billion, said these sources, with final valuation depending on the total capital it raises. The company has got commitments of $800 million to $1 billion from existing backers, SoftBank Vision Fund and Ant Financial, payments affiliate of Alibaba, according to these sources. Paytm was valued at around $10 billion when it last raised $300 million from Warren Buffett’s Berkshire Hathaway in August 2018. 

Paytm Mall is also in talks with online marketplace eBay  to raise a little over $150 million, said these sources. A deal with eBay may also include sale of the company’s India business, which would add to cross-border catalogue for Paytm Mall. eBay had sold its India business to Flipkart  in 2017 but re-launched it after Walmart acquired a 77% stake in the e-tailer. 

eBay has been in discussions with Paytm Mall for over seven months and they had also reached out to some other players. The overall round for Paytm Mall will also include other investors, said one of the sources. Paytm Mall was last valued at $1.9 billion, but the valuation of the current round could not be ascertained. Paytm Mall had changed its focus completely on online-to-offline business late last year, where it focused on delivery of products through shops close to customers’ homes rather than warehouses.

Final contours of both the deals are still being decided and could change, according to one of the sources. Sharma declined to comment when contacted by TOI. eBay and Softbank spokespersons did not comment, citing it as a speculation. Ant Financial did not revert to email queries at the time of going to press. 

If the transactions go through, they could make Paytm and Paytm Mall together close to India’s most valued internet company. Right now Flipkart Group, which also owns online fashion portal Myntra and payments unit PhonePe, is the most valued internet company at $22 billion. 

The capital for both units comes at a time when battle for market leadership is expected to further intensify in both payments and online retail, with entry of large players like Google  Pay and RIL. . Starting out with online mobile recharges, Paytm has expanded into other areas, which need digital transactions like bill payments, movie ticketing, flight and hotel booking to acquire users. Since then it has also launched wealth management under Paytm Money and also has a payment banking licence. 

The company has over 50 million monthly active users and 135 million annual active users, with annualised gross run rate of transactions flowing through the platform at $80 billion, said one of the sources.

Digital payments will not be a winner takes all sector, and the growth in the space will continue, according to investors tracking the space. 

The difference between payments and food delivery or online retail is that it is an infinitely growing market. Fast forward the next 10 years about half of the economy will be digital, which means we will have $2-3 trillion of payments and $200-300 billion of market capitalisation/value creation in the space. Some of it will go to banks and some will go to overseas players like Google. But there will be 4-5 companies which will be worth tens of billions of dollars, said Vikram Vaidyanathan, MD at venture capital firm Matrix Partners India, which has backed companies like point of sales player Mswipe and payment gateway startup Razorpay.

Source: timesofindia.indiatimes.com

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