Paytm set to join India's decacorn club; to raise $1.5 b

 Paytm, a FinTech startup run by One97 Communication and founded by Vijay Shekhar Sharma, is all set to become the second mobile Internet company to join the decacorn club in India once it completes Japan’s SoftBank Group funding of $1.5 billion.

As per sources familiar with the development, SoftBank will invest in Paytm by buying shares from existing investor SAIF Partners and Sharma. “Besides bringing Snapdeal-owned payment firm Freecharge, SoftBank will also invest in Paytm taking its total valuation to $10 billion,” said the source to DH. While unicorns are companies that quickly achieve a billion-dollar valuation, the term was coined by Cowboy Ventures founder Aileen Lee in 2013, a decacorn is a company that achieves a $10 billion valuation.

Paytm was valued at about $5 billion in August when the company raised $60 million from Mediatek. When Alibaba and Ant Financial purchased the combined stake of 4.3% from Reliance Capital, SVB (Saama Capital) and SAP Ventures, its valuation reached $6 billion.

Getting SoftBank on board as a large shareholder will help Paytm reduce the control of Alibaba and pre-empt possible government concerns about a Chinese firm having a strong hold on Paytm, say analysts.

Rajeev Banduni, co-founder and CEO of GrowthEnabler, said SoftBbank’s fund infusion will be one of the largest investments by a single investor in an Indian startup. “It will make SoftBank one of the largest shareholders in Paytm, the country’s top mobile wallet which also got payments bank licence,” he said.

Banduni also pointed out that the SoftBank fund will also help Paytm keep away concerns of the government that it is a company having strong ties with China. “Getting SoftBank on board as a large shareholder will help Paytm reduce the control of China’s Alibaba Group Holding,” he said.

SoftBank was in talks with Paytm last year to invest up to $150 million to $200 million in Freecharge, along with other investors. According to sources familiar with the development, an earlier assessment valued Freecharge at around $900 million to $1 billion. But the Freecharge valuation has come down now.
The Japanese investment company has a solid relationship with Alibaba with its initial investment of $20 million in the beginning which is worth more than $60 billion, when Alibaba listed its shares in 2014.

Paytm recently announced that its user base has crossed 200 million wallet users in February 2017, and that it registered a rise of 12% in its payments volume to Rs 5,000 crore during January 2017 compared with December. It is expected to translate to an annual run rate of $9 billion to $10 billion.

According to McKinsey Global Institute report, the active adoption of digital banking can raise GDP across developing economies by 6% by 2025, generating over 95 million jobs and $3.7 trillion.

“Alibaba wants to replicate the Alipay success in China with its 400 million registered users as of February 2017, with its total volume of transaction went up from $70 billion up to $1.7 trillion in 2016. Paytm is also brought on board 5million offline merchants and POS which is also very important,” said Banduni.