Paytm is the new Indian unicorn on the block

Paytm e-commerce plans to add close to a billion products from across the globe to its platform before the festive season this year.

Image: Vijay Shekhar Sharma, left, sees Alibaba's Jack Ma, right, as an inspiration. Alibaba, which is China's largest e-commerce company, is the investor in One97 Communications -- Paytm's parent company. Photograph: Courtesy Vijay Shekhar Sharma/Twitter.

Paytm’s e-commerce unit has become the latest Indian unicorn (term for an unlisted company valued at over a billion dollars), after raising $200 million in a funding round led by Chinese e-commerce giant Alibaba.

According to a filing with the registrar of companies earlier this week, Alibaba’s Singapore unit will invest $177 mn into Paytm E-Commerce Pvt Ltd, with the remaining $23 mn from SAIF Partners, also a prior early investor.

Paytm announced plans to split its e-commerce business from the larger payments unit in the middle of last year. The overall One97 holding company enjoyed a valuation of $4.8 billion when it raised $60 mn from Mediatek in August but sources had said the majority of this would lie in the payments arm.

With the Alibaba investment, the marketplace unit of Paytm has also achieved unicorn status, with the funds being used to help take on giants Flipkart and Amazon. The move also paves the way for Alibaba’s formal entry into India’s fast growing e-commerce market.

Alibaba’s entry could upset the signs of equilibrium in e-commerce, with Flipkart and Snapdeal beginning to focus on building profitable businesses. The capital Alibaba brings could also spark a war between it and US-based Amazon, potentially sidelining homegrown entities.

Sources say Paytm e-commerce plans to add close to a billion products from across the globe to its platform before the festive season this year. It would include sellers from Southeast Asia especially from Alibaba’s other investments such as Lazada from Indonesia.

This would be nearly twice the number of products compared to those on Amazon’s platform in India and nearly 20 times compared to Flipkart and Snapdeal.

India’s e-retail sector growth fell by 15 times to 12 per cent in 2016, to $14.5 bn. In 2015, the sector clocked $13 bn, growing 180 per cent over the previous year, according to RedSeer Consulting. However, the outlook for the market continues to remain extremely positive in the long term.