Paytm to infuse Rs.1,000 cr. into ecommerce business for a stronger hold in the market

Paytm’s management claims that ecommerce is its key business, said Paytm founder Vijay Shekhar Sharma. The ecommerce firm recently separated its payment business from its marketplace business. Now the company plans to infuse Rs. 800 – 1,000 crores into its separate online retail entity. This extreme investment is supposed to strengthen Paytm’s position in the cash-hungry ecommerce industry.

Paytm’s fund acquisitions

Taiwanese chip manufacturer, Mediatek ,recently led a round investment that gave Paytm about Rs. 400 crore. Now the ecommerce and digital payment company is working on raising Rs. 1,600 crore. For now, Sharma said, the compnay will allocate all the new capital to its payment bank business. It is meant to help kick-start the beta launch by Diwali.

Paytm’s founder mentioned, “The latest funding round will take about two months to close but the management has decided our marketplace is a key business for us, and new investors will put in money into the commerce entity . We will be able to adequately capitalise our marketplace business with Rs 1,000 crore initially.”

Attracting new investors

Chinese ecommerce giant, Alibaba is Paytm’s largest investor. It is believed that Alibaba may use Paytm’s etail business to launch its operations in India. No comments were made on this possibility by Sharma.

He simply stated, “Creating a new entity for the marketplace will allow us to dedicate a separate team and invite independent shareholders who will put money for this business.”

• Last year, Paytm attained a GMV of approximately $3 billion, around 60% of this came from its core business in payments. (The GMV doesn’t include discounts and returns made.)
• Paytm’s recorded losses are Rs. 372 crore on account of expenses for putting capital into its ecommerce verticals to compete with ecommerce leaders Flipkart and Amazon.
• But a year ago, the firm managed to register a profit of Rs. 5 crores.

“Our offline-to-online (o2o) business where we sell tickets for cinema, offer bookings for hotels and buses, facilitate payment of education fees will also play a crucial role going ahead because we would leverage our user base for commerce and o2o businesses,” said Sharma.

He also explained that transactions from o2o vertical have grown to a point where management is confident to invest in it further. They may not be number one in many of these categories, but the growth recorded is a pleasant surprise. It has also given the etailer many new players who have stuck around, mentioned Sharma.