China: India enjoyed an ecommerce investment boom in 2014

Alibaba is in advanced talks to buy an approximately $500m stake in the parent company of leading Indian mobile payment platform Paytm, marking the Chinese ecommerce group’s initial significant foray into the country’s rapidly expanding start-up scene.
Both Alibaba Group Holding’s ecommerce arm and its online payments unit Alipay are set to participate in the transaction, which will conclude later this month, three people familiar with the transaction told the Financial Times.

India enjoyed an ecommerce investment boom in 2014, as prominent Silicon Valley-based funds began pouring fresh funds into fast-growing domestic start-ups, such as e-retailer Flipkart and online marketplace Snapdeal, at multibillion-dollar valuations.

The arrival of Alibaba, the major ecommerce group by revenue, is likely to increase excitement over the sector’s prospects. It will as well pit the Chinese company against US-based Amazon, which invested $2bn in its local subsidiary last year.

Under the terms of Alibaba’s transaction, its two entities will take minority stakes as part of a two-stage investment in One97 Communications, the parent company of Paytm, India’s biggest mobile payments company by market share.

Paytm allows Indian phone users to put funds in a mobile wallet, which they can spend on services such as taxi app Uber and cinema service BookMyShow. It claims to have about 20m users.

Paytm as well launched an online marketplace last year, providing a platform for businesses to sell products online. This is similar to Alipay, China’s leading payment platform by revenue, which Alibaba offers in its home market.

“The two most exciting sectors in Indian technology are ecommerce and payments, and they [One97] have both,” the person said, on condition of anonymity. “So while the business isn’t as large as Amazon or Snapdeal from presently on, they have the same parts as the Chinese, so it fits together perfectly.”

Although Alibaba is understood to have no plans to launch its own services in India, its likely investment in Paytm follows a string of deals in 2014 by founder Jack Ma, ahead of his company’s blockbuster $25bn initial public offering in New York last September.
Alibaba could not be reached for comment, while Paytm founder Vijay Shekhar Sharma declined to discuss his fundraising plans. Paytm’s investors include SAIF, Saama Capital and SAP Ventures.

Paytm will use the new funds to invest in infrastructure helping thousands of smaller Indian businesses to use their mobile marketplace, grabbing additional of an ecommerce sector that will be worth $44bn by 2018, according to analysts at CLSA. Only a small fraction of the country’s 200m internet users transact online, according to Jefferies, a broker.