Paytm parent One97 raising $635M from Alibaba Group, SAIF; valued just over $2B

Noida-headquartered mobile internet firm One97 Communications Ltd, which has been in talks with various suitors to raise fresh money, especially to boost its flagship m-com and virtual wallet property Paytm, is raising $575 million from the world's largest e-com firm Alibaba and the group's separate payment unit Alipay. This is in addition to $60 million more from existing lead investor SAIF Partners, sources close to the development told VCCircle.

The deal would value One97 at around $1.5 billion pre-money or just over $2 billion, post-money. This would make it the second most valued internet related firm in India, behind Flipkart.

Snapdeal was valued lower than this in the last funding round led by SoftBank. The three listed firms Info Edge, Just Dial and MakeMyTrip are all valued under $1.7 billion, currently.

SAIF has already put around $10 million as part of a cash-flow funding round, separate from the current round which is worth $625 million, sources said.

Sources added that SAIF Partners, which currently owns around 50 per cent in the company, will continue to be the single-largest shareholder with just under 40 per cent holding, post this transaction. Alibaba Group would own around 30-33 per cent with Vijay Shekhar Sharma owning 22 per cent stake worth around $450 million.

The rest would be with other small investors including SAP Ventures, Silicon Valley Bank and Reliance Capital besides individual investors such as Nikhil Vora (formerly with IDFC but now running an independent VC firm), it is learnt.

One97 zeroed in on Alibaba Group as the new investor after negotiating with various possible suitors including Singapore's state-owned investment firm Temasek among others. It had signed a term-sheet for investment with Temasek as first reported by VCCircle but decided to go ahead with a deal with Alibaba.

It is likely to finalise the deal this month itself. It would also mark a fresh round of funding for the firm after almost three-and-a-half years.

For Alibaba, this would be the first significant strategic move in the country and its biggest bet since last September when it saw through its mega $25 billion public float on NYSE, the world's largest ever.

Alibaba, which draws its strength from its B2B as well as B2C e-com properties in China, has a presence in India through its local channel of its B2B property in the mother brand. The Indian site, however, is a bit player in the fast growing marketplace now dominated by B2C ventures Flipkart, Snapdeal and Amazon.

India is one of the nine countries where Alibaba's B2B marketplace is present. Besides China and India is it also present in the US, Japan, Malaysia, Thailand, South Korea, Turkey, Taiwan and Vietnam.

Its B2C ventures Taobao among others are presently only in home country China.

The investment comes around two months after its founder and chief Jack Ma visited India as part of a Chinese business delegation and said he is looking to invest more in the country.

It would also mark the second such significant strategic investment in India from a global e-com major. eBay is an existing investor in Snapdeal.

Citibank and Goldman Sachs were the financial advisors to One97 in the fundraise with Amarchand & Mangaldas & Suresh A Shroff & Co being the legal advisor, it is learnt.

Meanwhile, One97 has also applied for a 'payments banking' licence and part of the funds raised would be used to double its reach in India with investments in technology and customer acquisition.

When contacted, the spokesperson of One97 declined to comment whereas email queries sent to Alibaba, Citibank, Goldman Sachs and Amarchand & Mangaldas & Suresh A Shroff did not immediately elicit any response.

SAIF Partners had declined to comment on a previous story on the impending investment.

One97 Communications, which was primarily a mobile value added service provider, is now better known for running the digital goods and services marketplace Paytm, which had initially started as a mobile and DTH recharge platform.

The firm had initiated talks with investors last year. In a previous interaction, co-founder and CEO of One97, Vijay Shekhar Sharma, had said that existing investor SAIF Partners has committed to invest around $60 million while unnamed investors had offered to invest up to $250 million.

As per previous media reports it was in talks with Japan’s SoftBank, Google Capital and Atlantis Capital among others for the new funding.

Founded in 2000, One97 Communications is a leading mobile-internet company in India that offers digital goods & services to its mobile consumers under the Paytm brand. It also provides mobile advertising, marketing and payments for merchants. In addition, it has a partnership with existing lead investor SAIF Partners where it invests in early stage mobile internet startups through One97 Mobility Fund.

The company had previously raised funding from SAIF Partners, Intel Capital and Silicon Valley Bank, having raised around $30 million spread over three-four rounds.

It first raised Rs 26 crore (around $6 million then) in March 2007 from SAIF and SVB. It got Rs 10 crore ($2.5 million) more from the same investors at the end of the same year through convertible securities. A year later, it scooped just under Rs 50 crore ($10 million) from Intel Capital and SVB.

In 2010 it bought some shares from One97 co-founders for around Rs 45 crore, bulk of it from Peeyush Aggarwal.

One97 had also filed to go public, where it sought to raise Rs 120 crore. It had received a go-ahead from the market regulator SEBI and had originally planned to list by December 2010. But it had decided to shelve the proposed domestic IPO plan and decided to rope in a new private investor.

At that time it raised $10 million in its third round of funding from SAP Ventures in 2011, the corporate venture capital arm of German software giant SAP. The company’s valuation during this round was nearly $300 million.

It also counted small shareholders like IDFC, Reliance Capital besides individual investors such as Nikhil Vora.

SAIF Partners had bought out the stake held by Intel Capital and IDFC for an undisclosed amount thereby increasing its holding to around 50 per cent.

Note: This article has been updated with fresh information gathered from sources.

(Edited by Joby Puthuparampil Johnson)

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