China's leading e-commerce firm Alibaba is eyeing to increase its stake in the Indian e-tailer Paytm to 40 percent as part of its effort to expand its presence in the rapidly growing Indian Internet retail sector.
Alibaba first landed on Paytm in February when its financial services unit, Ant Financial, bought a 25-percent share in One97 Communications, the owner of the said Indian firm.
Currently, Alibaba is in talks with the company regarding an investment deal valued at over $600 million for an additional 20-percent stake. This is according to a person familiar with the transaction.
The investment is expected to increase the valuation of Paytm, tallying up to $3.7 billion on a post money basis. This figure is a 270-percent increase from the previous funding round.
Valuations have been soaring in the Indian e-commerce sector, as exemplified by the leading firm, Flipkart. It raised money in May 2014 a valuation of $1 billion and over a year later, it is set to raise funds anew at a target valuation worth $16 billion.
"Paytm is expected to be Alibaba's e-commerce play in India. The plan is to create an ecosystem through companies that have large consumer touchpoints," the source familiar with the deal added.
The Alibaba-Paytm deal is expected to be a significant booster in the Indian firm's position in the sector, even catapulting it to the rank of the big names in the game such as Flipkart, Amazon India and Snapdeal.
While Alibaba could get hold of a 20-percent share in the firm, its Ant Financial group's share will be reduced from 25 to 20 percent, making the total stake owned by the Chinese e-commerce firm to 40 percent.