PayTM, the Indian payments start-up supported by Alibaba of China, plans to invest Rs50 billion ($755 million; Dh2.8 billion) in an aggressive three-year expansion, as it aims to become India’s largest ecommerce group by revenue.
In September, PayTM completed a second funding round from Alibaba and its online payments affiliate Ant Financial, bringing its total Chinese funding to $680 million. The deal valued PayTM at $2.5 billion, making it one of India’s most valuable start-ups.
PayTM founder Vijay Sharma told the Financial Times he would use the funds to increase sharply the number of merchants selling on its online marketplace — most of whom are small businesses — from about 100,000 today to 1 million by 2018.
The New Delhi-based group also plans to turn its online payments arm into a fully fledged financial services group, having secured a banking licence from the Reserve Bank of India in August, before eventually taking PayTM public, as Alibaba’s billionaire founder Jack Ma did for his own company last year.
“We believe that we’ll be able to bring half a billion Indians into the mainstream of the economy. Alibaba have done it in China, and with their help we can do it here,” Sharma said.
“We are talking about a couple more years of 100 per cent or more year-on-year growth, but once this has settled down and become more predictable, we would like to go public,” he added.
Previously a relatively minor participant, Alibaba’s investments catapulted PayTM into what analysts now view as the Big Four companies vying to lead-India’s booming ecommerce sector, alongside US-based Amazon and Indian domestic groups Flipkart and Snapdeal.
PayTM claims annualised income of about $2.4 billion measured by gross merchandise value — a metric favoured by ecommerce groups, which tracks the value of goods sold by merchants using their platforms — making it about the same size as Amazon in India, but smaller than its other two rivals.
Rather than focusing primarily on online retail, however, PayTM plans to follow the approach used by Ma as he built Alibaba into the world’s largest ecommerce business by revenue, developing a mixed business model focusing on mobile sales, payments, and services such as banking and insurance.
Sharma also said that Alibaba, as the group’s only investor, provided his business with a competitive advantage compared with its rivals, which have each raised capital from more than a dozen venture groups.
“We do not have investors seeking an exit, so we can play the long game,” he said. “While these three companies [Amazon, Flipkart and Snapdeal] are fighting over who can sell the most smartphones, we will have a different model.”
As part of its investment drive, PayTM plans to integrate closely with Alibaba, both by bringing Chinese sellers to its Indian customers and helping its own Indian merchants to access global markets through the Chinese group’s sites, such as business-to-business arm Alibaba.com.
“They [Alibaba] want a lot of Indian merchants to sell on the Alibaba platform,” Sharma said. “Jack [Ma] had said that when you find a spice trader from India and give them a new market in India online, and then Alibaba can extend the world market to them, then we will have it sorted.”
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