SoftBank Money Not so Very Crucial to Paytm

With reports circulating that Paytm may raise 12,000 crores from SoftBank in the next 3 weeks, Vijay Shekhar Sharma, the founder of Paytm said, “We are comfortable to live the way we spend for the next one year,” and that if there will be any such SoftBank development, that it will be announced in due time.

If the fund raise does materialise, then it’s going to be the mother of all fund infusions in Indian ecommerce at approximately 1.9 billion dollars and may value Paytm at around 9 billion dollars. It overtakes the 1.4 billion dollar investment Flipkart received from investors like Tencent, eBay and Microsoft in early April.

The founder of Paytm is adamant they won’t be hustled into the deal. “95 percent of One97 [Paytm’s parent company] is owned by three stakeholders. So even if there’s a fund-raise happening we will do it on our terms,” he said. Some of the prominent stakeholders of One97 include SAIF Partners (approx. 30 percent), Alibaba Group entities (approx. 45 percent) and Mr Sharma himself (approx. 20 percent). Paytm already has other high profile American investors interested. Despite being comfortable for the next one year, Mr Sharma was quoted by PTI as saying the company will invest 10,000 crores in banking and financial services in the next three years. The company spent around 100 million dollars (640 crores) in Q4 FY 2017 ending March.

The 1.9 billion dollars from SoftBank is a piece of the Flipkart-Snapdeal puzzle. SoftBank is looking to consolidate the Indian ecommerce industry while protecting its vested interests in Snapdeal. Actions may include merging Snapdeal with Flipkart. As part of the agreement, Flipkart may receive investment from SoftBank. Since SoftBank seems to deal only in amounts close to billions, the investment will likely be around there (ball park figure). To tie up the loose end that is Snapdeal’s online payment arm, FreeCharge, the investors are looking to merge it with India’s largest fintech, Paytm after discussions with PayPal fell through. First FreeCharge’s price tag was 500 million dollars but now could be sold for anything between 150 and 300 million dollars. Snapdeal purchased FreeCharge for 400 million dollars in 2015.

Industry sentiment is that despite being a top candidate to buy FreeCharge, Paytm doesn’t seem keen on the sale. MobiKwik too is in the fray to merge with FreeCharge.