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Paytm to raise over $1 bn from SoftBank; move to reduce Chinese co Alibaba's influence

It's raining big capital flows into the country's startup industry following a dry spell last year. After Flipkart last week announced raising $1.4 billion from the slew of overseas investors, it's now the turn of Vijay Shekhar Sharma-promoted fintech start-up Paytm that is in talks to raise around $1.2-1.5 billion in cash.

The company has been in talks with Japanese investor SoftBank for last three months, and the deal could see it buying shares from the current Paytm investor SAIF Partners and founder Vijay Shekhar Sharma, Mint report said.

Once the fund-raising exercise fructifies, it could push Paytm's valuation to $7-$9 billion from around $6 billion attained this March. Uptick in valuation for the company's parent One97 Communications will happen at a time when the valuations of several start-up unicorns were downgraded in recent times. For instance, Flipkart's valuation at $11.6 billion last week is down from its peak of $15.2 billion while taxi-hailing app firm Ola also witnessed a 40 percent drop in valuation to $3 billion from $5 billion, The Economic Times report said.

Reuters

Reuters

Patym will be keen to raise funds from SoftBank, as it will help it to reduce the control of China's Alibaba Group which is the largest shareholder in the company.

Besides this, getting SoftBank on the board as another largest shareholder could help allay government's concerns, which remains skeptical about the Chinese firm holding a majority stake in the company as financial services is considered a strategically important sector.

“Getting SoftBank will help Paytm change the perception of being a Chinese company with the regulators as well as the public,” the Mint report said.

For SoftBank, the proposed investment in Paytm will further expand its presence in the country's growing e-commerce market, although its investments in Snapdeal didn't yield any desired results.

The Japanese investor and Snapdeal founders are currently engaged in conversation with the country's largest e-commerce firm Flipkart to sell the company. Last week, SoftBank infused funds in Flipkart in return for a stake in the latter. With the latest round of proposed fund infusion in One97, the Japanese investor will have a sizeable presence in the country's top e-commerce companies.

In fact, SoftBank's plan since last year has been trying to sell Snapdeal to Flipkart and FreeCharge to Patym in return for stake ownership in these companies, the ET report said.

The funding will also help Paytm accelerate expansion plans ahead of the launch of its payments bank service. The Alibaba-backed company already runs mobile wallet and e-commerce services.

Paytm has seen manifold growth in transactions on its platform after the government scrapped high denomination notes in November last year.


Updated Date: Apr 19, 2017 13:11 PM

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