NEW DELHI: Alibaba, the Chinese e-commerce giant, is to invest Rs 1,180 crore ($177m) to increase its holding in Paytm E-Commerce, an online unit of One97 Communications, which owns the Paytm brand.
It means Alibaba, along with its payments affiliate Ant Financial, will see its combined 40% stake in Paytm E-Commerce increase to 62%, the Economic Times reported.
SAIF Partners, a leading Asian technology investment fund, is also investing $23m to take the full value of the funding round up to $200m.
The latest investment is expected to value Paytm E-Commerce at $1bn, although one person directly familiar with the matter told the Economic Times that Alibaba's shareholding is likely to reduce over time as employees take more than 10% of the overall share.
"This [the Alibaba shareholding] will come down as the company creates a large employee stock option pool [Esop] to attract and retain talent," the source said.
"We want to build this [Paytm marketplace] into the market leader of e-commerce in India, and Esop will be for both new and existing employees."
Alibaba's increasing interest in the Indian e-commerce market, and specifically its plans for Paytm E-Commerce, have been anticipated for some time and it comes as US rival Amazon has been rapidly expanding its presence in the country.
Just last week, Amazon was named the top "mobile-ready" brand in India by Ansible, the mobile and technology agency of IPG Mediabrands.
With the competition heating up, Rutvik Doshi, Director at Inventus Capital Partners, observed: "It looks like a Mexican standoff between four to five players waiting for other players to blink. India has become a proxy battlefield between Amazon and Alibaba, and there maybe a few casualties."
Meanwhile, Devangshu Dutta, Chief Executive of retail consultancy Third Eyesight, told the Financial Times that Alibaba may seek to merge Paytm E-Commerce with Snapdeal in order to build scale in India.
He said Snapdeal, India's third-largest e-commerce player by sales, has been struggling in recent months and that Chinese product suppliers are "extremely eager" to tap the Indian market in a more structured way. "This market is still evolving and there is a huge playing field left uncovered," he said.
Data sourced from Economic Times, Financial Times; additional content by Warc staff