Paytm raises $60 million from MediaTek as India's ecommerce scene heats up

Image: Amit Verma

Vijay Shekhar Sharma, founder and CEO of Paytm

One97 Communications Ltd., a New Delhi based mobile wallets and ecommerce company, has raised fresh funding in a move to build on its leadership position in India’s hot payments and ecommerce scene.

The company, which operates the Paytm mobile wallet platform and an online shopping site of the same name, has raised an undisclosed amount from Taiwanese chip maker MediaTek’s investment arm, Mountain Capital, One97 said in a press release on Wednesday. MediaTek is an existing investor in Paytm’s rival Mobikwik Systems.

One97, in which China’s Alibaba Group is a large investor, has raised $60 million (Rs 400 crore) in a deal that values the company at $4.8 billion, a person familiar with the deal told Forbes India on condition of anonymity. The company’s existing investors include Ant Financial (Alipay), SAIF Partners, Sapphire Venture and Silicon Valley Bank. Some of these investors may also invest, expanding the funding round further, the person said.

Paytm is widely seen as India’s largest mobile wallet provider. The company said in its release on Wednesday that it had 135 million users. The money from this investment will be used for expansion as the company seeks its stated target of reaching 500 million users, and building and launching the proposed Paytm Payments Bank, the company said in the release. Paytm has a licence from India’s central bank, the Reserve Bank of India, to build such a bank.

“India is ripe for its financial services revolution and with the growing penetration of smartphones, we have an opportunity to give a new business model of payment, banking and financial services combined with online commerce,” Vijay Shekhar Sharma, founder and CEO of Paytm said in the release.

Paytm faces competition from other startups such as Gurgaon’s Mobikwik and Bengaluru’s Freecharge, which is part of Delhi’s online marketplace business Snapdeal. Large private banks such as ICICI Bank and HDFC Bank are also offering their own mobile wallets and other digital payments solutions, as are wireless providers such as Bharti Airtel Ltd.

As a result, Indian urban middle class households, especially, with smartphones and 3G and 4G wireless connections are able to transfer money, pay bills, pay for movie tickets make travel bookings and so on.

MOBIKWIK Raises $40 Million

Last week, Mobikwik announced it had raised $40 million from South Africa’s Net 1 UEPS Technologies, a financial technology and payments platform company. Mobikwik said it had over 32 million users and is accepted at 100,000 retailers in a press release on Aug. 26.

Mobikwik has also struck a subscription and technology agreement with Net1, through which Net1’s Virtual Card technology will be integrated across all MobiKwik wallets, the company said in its press release. The Gurgaon company’s other shareholders include Sequoia Capital, Tree Line Asia, American Express, Cisco Investments, and GMO Payment Gateway apart from Bipin Preet Singh and Upasana Taku, the founders and executive officers.
 
The size of India’s digital payments industry will reach $500 billion by 2020, representing a ten-fold increase from current levels, Mobikwik said in its release, citing a Boston Consulting Group report from July 2016. The report predicts that more than 50 percent of India’s internet users are expected to use digital payments by 2020, and the top 100 million users are expected to drive 70 percent of digital payments by value.

The report also forecasts that the value of remittances and money transfers that will pass through alternative digital payment instruments will double to 30 percent (of the total) by 2020, Mobikwik said in the release.