US-based online retailer eBay Inc. is investing in Vijay Shekhar Sharma-led Paytm Mall to acquire a stake of about 5.5%, the two companies said on Thursday.
The companies didn't disclose the amount eBay is investing but multiple media reports pegged it around $150-165 million (between Rs 1,032.23 crore to Rs 1,135.45 crore at current exchange rates).
Based on these reported figures, the online retail platform’s valuation could jump to between $3.3 billion to $3.6 billion (between Rs 22,709.11 crore to Rs 24,773.58 crore). According to VCCircle analysis, a previous $446 million investment by Japanese conglomerate SoftBank and Chinese e-commerce giant Alibaba saw Paytm Mall being valued at around $1.89 billion.
The companies said in a statement that they have also reached an agreement that will make eBay inventory accessible to Paytm Mall's customers in India.
“We are deeply committed to India and believe there is huge growth potential and significant opportunity in this dynamic market,” said Jooman Park, eBay's senior vice president for Asia-Pacific.
“This new relationship will accelerate our cross-border trade efforts in a rapidly growing market, providing hundreds of millions of Paytm and Paytm Mall customers with access to eBay’s unparalleled selection of goods,” Park added.
Separately, Paytm Mall executive director Rudra Dalmia said the collaboration between the two companies would give consumers more opportunities to discover products and have transactions on the platform.
eBay's investment comes a little more than a year after it sold its stake in Indian online retailer Flipkart to US-based Walmart Inc.
Paytm Mall, operated by Delhi-based Paytm E-commerce Pvt. Ltd, counts Japanese Internet conglomerate SoftBank and Chinese e-commerce behemoth Alibaba among its existing investor. The company had raised around $446 million (around Rs 2,892.5 crore then) from SoftBank and Alibaba last year.
India’s e-commerce sector
The investment in Paytm Mall is the latest move by a foreign entity to capture the emerging e-commerce space in India. Currently, the space is dominated by the players like the domestic arm of Amazon, the Walmart-owned Flipkart and Snapdeal, which has been backed by several investors including SoftBank.
Recently, media reports suggested that Snapdeal was in talks with ShopClues for a potential acquisition of the latter in an all-stock deal that would have seen it valued at between $200 million to $250 million. Snapdeal even conducting the due diligence on ShoClues.
However, later it emerged that the deal may not materialise as Snapdeal’s diligence had revealed significant pending liabilities with ShopClues. Interestingly, both the companies have common investor - Nexus Venture Partners.
E-commerce firms and their business practices have also drawn regulatory scrutiny as their overall influence in the retail space continues to grow. Last month, the central government told companies that they must ensure compliance with new foreign investment rules that are aimed at deterring them from providing steep discounts.
In February, the central government had introduced rules designed to help small traders and businesses, but critics of e-commerce companies allege that they are using tactics such as complex business structures to circumvent these rules.