Paytm could reach a valuation of $16 billion and raise another $2 billion in funds. The investment is likely to be picked up by the existing investors SoftBank Group of Japan and Ant Financial, the investment arm of the Chinese giant Alibaba. It is learnt that the funds could be part equity and part debt, in equal proportions.
The report on this development claims these are early days and preliminary discussions have only begun. At $16 billion, Paytm may outgrow startups like Grab and Gojek, when considered at the Asian level. This is in terms of valuation of the startups.
The digital payments space in the Indian context is getting very crowded with powerful new entrants like Google Pay, Amazon Pay and Flipkart’s (now owned by Walmart) PhonePe. There have been rumours of PhonePe being hived off as a separate entity. All these players along with a few others will challenge Paytm’s leadership position. The funds now being raised are expected to be for leveraging the share of the digital payments market that Paytm enjoys and to protect its turf. These new players are able to lure the subscribers through offers which include cashbacks and coupons. Paytm too has resorted to these, but severe competition may force it to increase these along with other promotional activities.
Everyone is chasing the estimated $1 trillion digital payments market in the country according to an estimate by the Credit Suisse Group AG. This figure may be reached by 2023. The current level is estimated to be $200 billion, which itself is not a small figure.
Having been in the business for some years now, Paytm capitalised on the situation created in November 2016 with the demonetisation. It opened up the opportunity to push the digital payments app and it worked. Interestingly, though Paytm is trying to expand the scope of services that could be availed within its app, others have also brought in a wide bouquet of services like investments, loans and insurance products.