Alibaba to buy stake in Indian mobile payment group Paytm

By Nicole Miskelly | 13 January 2015

Alibaba is in advanced talks to buy a stake of around $550m in One97 Communications, the parent company of India's biggest mobile payments company, Paytm. The investment by the Chinese technology group is their first venture into India’s rapidly developing online scene and is expected to be officially announced by the end of this month.

Alibaba, the world’s largest e-commerce company and its unit Alipay are both set to participate in the deal,  and under the terms outlined will hold between 30 percent and 40 per cent of One97 Communications.

India received an ecommerce investment boom in 2014, when Silicon Valley poured fresh funds into fast-growing start-ups such as online marketplace Snapchat and e-retailer Flipkart which both had million-dollar valuations.

One97 runs Paytm, which has around 20m users, and allows Indian phone users to put funds in a mobile wallet, which can be spent on service such as cinema ticket service BookMyShow and taxi app Uber. Other investors of One97 include Intel Capital, SAIF Partners and SAP Ventures.

According to sources, the investment by Alibaba will be used to expand Paytm services, in hopes to dominate the rapidly developing online payment business in India. Last year, Paytm also launched an online marketplace similar to Alipay, which provides a platform for businesses to sell products to customers online.  

The FT reports that the arrival of Alibaba in India is likely to increase excitement in the sector and will also help the Chinese company to rival US-based Amazon, which invested $2bn in its local subsidiary last year.

Although sources say Alibaba has no plans to launch its own services in India, online payments in the region are expected to continue to grow rapidly over the next few years. Paytm is expected to use the new funds to invest in thousands of smaller Indian businesses to help them to use their mobile marketplace, resulting in a greater share of the ecommerce sector which according to analysts will be worth $44bn by 2018.

Figures show that only a small amount of the country’s 200m internet users currently transact online, however, projections of rapid smartphone growth in the next few years has led analysts to predict a boom in online services, with smartphone sales expected to reach 200m in 2017.

By Nicole Miskelly, bobsguide Lead Journalist

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