Paytm, owned by One97 Communications, appears to be hungry to expand and widen its base within the financial sector. The latest news is that it is planning to acquire Mumbai-based insurance aggregator Coverfox at a price of $100 to $120 million. It could be an all-cash deal and may see all the existing investors in Coverfox making an exit. This is barring any last-minute hitch as there is at least one investor, SoftBank Vision Fund who has stakes in Paytm whose stand is critical. If this acquisition goes through, then Paytm will be direct competition with Policy Bazaar which has a similar business model and SoftBank is a key investor in Policy Bazar too.
If the deal goes through, however, it will place Paytm in a strong position having interests in a payments bank, the digital wallet, selling mutual funds and now an insurance arm with Coverfox.
Coverfox can bring other benefits as well. The startup has a 50,000 strong offline agents base and offers insurance products in both life and non-life categories from 45 companies. With Paytm pushing for an O2O model in its other businesses the Coverfox business may just add more muscle to the attempts.
Coming to the investors in the companies, SAIF Partners, Accel Partners, Catamaran Ventures (of NR Narayana Murthy) and International Finance Corporation are the investors in Coverfox and the company has raised around $40 million in funds so far. As mentioned, almost all of them will sell their holdings to Paytm and make an exit. Coverfox is said to be looking for funding to the tune of $50 million even as these takeover talks are on.
Paytm counts the Alibaba Group of China as its largest investor, besides the SoftBank Group of Japan and SAIF Partners and Berkshire Hathaway. The company has been trying to expand its ecommerce business Paytm Mall, under pressure from Alibaba, but has not been in a position to give fight to the likes of Amazon and Flipkart. In the financial services segment, however, it is taking on players like ET Money, Zerodha, FundsIndia and Scripbox. The company has received a licence for stock broking and even before the Coverfox acquisition development, Paytm holds a licence from IRDA to deal in insurance products.