• Digital Payment through Paytm

Digital Payment through Paytm (Photo : http://www.gettyimages.com/)

China's Internet giant Alibaba is set to inject $200 million into Paytm, which will give India's mobile wallet service provider a valuation of about $1 billion and boost its e-commerce business, indiaretailing.com said in an article.

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Alipay, Alibaba's payments affiliate, and SAIF Partners, an investment firm, have reportedly joined the deal.

Sources said that the funding is expected to raise the shares of Alibaba and Ant Financial in Paytm E-Commerce, to more than 50 percent from 42 percent.

In 2016, One97 Communications Ltd, Paytm's parent company, was worth $5 billion after raising about $60 million from its new investor Mediatek, during the last funding round.

Paytm officials said that a new mobile application and a new website will be launched this month, as the company is set to spin off its e-commerce business. The new platform will be called PaytmMall, after Alibaba's TMall. But the existing Paytm app will continue to be linked to its commerce business.

A company that began as a mobile payments and mobile recharge business, Paytm is now ranked as among the top three Internet companies in India. In the last two years, the company's e-commerce marketplace grew by offering consumers various products such as footwear, apparel, smartphones, movie tickets and bus tickets.

By the end of the month, the company will launch a payments bank, after Sharma, its founder, became one of the 11 recipients of the Reserve Bank of India's payments bank licenses.

Alibaba's new investment is seen to give the company a bigger advantage against three rivals in the e-commerce field: Amazon, Flipkart and Snapdeal. Similarly, Paytm's mobile wallet business and its payments bank is also expected to give Alibaba an edge in the country's emerging economy that will become "less cash" and later "cashless."

By 2020, Indian e-commerce market is expected to be valued at $60 billion. As of last year, the market was already worth $16 billion, with a growth rate of 45 percent annually.

But the three big players in the market have reportedly incurred losses last year, with Flipkart at over Rs. 5,200 crore, Snapdeal with more than Rs. 3,300 crore, and Amazon over Rs. 3,500 crore. In just one year, the three companies have posted total losses of more than Rs. 11,000 crore.

Aside from the new funding, Paytm will also have access to Alibaba's e-commerce technical knowledge and logistics supply chain as well as the opportunity to compete in one of the largest e-commerce markets in the world.