Paytm looks at biz recast to take on Amazon

Alibaba to provide back-up support

Paytm is all set for a business restructuring with the support of its Chinese investor Alibaba so that its ecommerce business can take on the challenges thrown by Amazon.

According to a source familiar with the development, the company is banking on its phenomenal trust with Alibaba. “We have been witnessing a good working relation with Alibaba that our payment technology is getting support from the company. This will further enhance business restructuring,” said the source, adding more number of meetings are happening for the past couple of weeks between the firms.

“The plan envisages the splitting of the ecommerce and payment business of Paytm. As per the RBI regulation, the company cannot continue with the payment business along with the ecommerce app,” said the source. The Indian ecommerce space has received global attention with the announcement of Amazon’s founder and Chief Executive Jeff Bezos’ plan to invest an additional $3 billion in its Indian operations during Prime Minister Narendra Modi’s visit.

“To take on the Amazon challenge, Alibaba will have to scout for a strong partner in India and Paytm fits well into the game plan,” said the source. Analyst from Motilal Oswal said the poster boys of Indian ecommerce Flipkart and Snapdeal cannot take the challenge, as their track records are bad and revenues are declining.

“Flipkart is reeling under marked down by global rating and investment companies. Snapdeal, which has been registering a triple digit growth in its gross merchant volume, witnessed only 80% growth in the last quarter,” he said.

In a recent interaction with Deccan Herald, Paytm founder and CEO Vijay Shekhar Sharma said the company has already declined queries from a couple of investors.

"We have enough funds to keep our business running for many many years to come. Year on Year, Our margins and spends have become superior and we are aggressively gaining marketshare in unstructured goods commerce. When we will need additional capital, we will think of  fresh fund raise. As of now we are focused on building our core payments and finencial services business and gaining profitability in marketplace side of business,” said Sharma.

Interacting with Deccan Herald, the Alibaba spokesperson from Hong Kong told that India is an important emerging market with great potential and we are absolutely committed to developing in this market for the long term.

"The country has a robust e-commerce environment and a rapidly growing mobile market which we believe will offer tremendous opportunities for the expansion of Alibaba’s ecosystem," he said.

The Noida-based wallet company is backed by investors, including Alibaba Group, Saif Partners, Sapphire Venture and Silicon Valley Bank. In September 2015, Alibaba and One97 Communication (Paytm parent’s company) announced that Alibaba and its payment arm Ant Financial have agreed to make a strategic investment in Paytm. Ant Financial made its initial investment in Paytm in February 2015.

Paytm has disclosed around $700 million in funding from investors that include Alibaba. Ant Financial was supposed to pump in $575 million in two tranches. The company had raised $200 million in March 2015 as the first tranche and met the target for the second one. Paytm placed a requirement of $375 million and Alibaba Group agreed to pump in $500 million. If this transaction is through, Alibaba will become the largest stakeholder in One97 Communication, approximately about 40%.