Chinese business magnate Jack Ma-led Alibaba and Ant Financials, after supporting Paytm for five years, have offloaded their entire stake in Paytm Mall, an e-commerce platform.
Alibaba got rid of a 28.34 percent stake in the company while its subsidiary Ant Financials sold its 14.98 percent stake.
Together, both the Chinese entities sold a 43.32 percent stake. Paytm E-commerce platform–Paytm Mall repurchased the shares for ₹ 42 crore.
The transaction valued the company at just ₹ 100 crore. This indicates a huge downfall in Paytm Mall’s valuation as, during its last fundraising in 2020, the company was valued at $3 billion (Rs 21,000 crore).
Paytm Mall was inspired by Alibaba’s T-mall model in China. In 2017, Paytm, in its first round of funding from Alibaba, raised $200 million (Rs 1,551 crore at the current rate) at a valuation of around $1 billion.
Paytm also raised funds of around $800 million from eminent top investors, including Alibaba, Ant Financial, and SoftBank.
Paytm Mall, however, disagreed with the reports indicating a huge fall in its market valuation as a repercussion of Alibaba’s exit.
It stated that an investor’s exit price, via capital reduction process, in this case, Alibaba and Ant Financial, is “not representative of the company’s valuation.”
“One simple metric is to consider that our cash balance itself is significantly higher than the quoted number in media reports, which establishes that the suggested low Fair Market Valuation is completely inaccurate,” said a Paytm Mall spokesperson who did not talk about Paytm Mall’s current valuation, as per a report in the Hindu Business Line.
Paytm E-commerce said it had to undergo operational losses despite infusing huge investments in expanding its business and market share.
It said the Covid-19 pandemic poses “unique challenges” and “demanding circumstances” for the company’s growth. It said additional capital would be needed to keep the company breathing in this India’s evolving online business space and unique business models.
According to a report in Mint, the company said the fintech sector is “highly competitive” with several large players.
“Against this backdrop, the specified shareholders (Alibaba and Ant Financial) have expressed their desire to exit their investments in the company,” it added.
Paytm Mall is optimistic that its Open Network for Digital Commerce (ONDC), a government-developed UPI-like platform for e-commerce would bring some relief for the company.
“We are focused on our transition to build a sustainable business in partnership with ONDC and are excited about the future of e-commerce in India,” a company spokesperson added.