According to reports, citing two people aware of the development, Softbank Group is in early discussions to invest as much as $3 billion in Indian online marketplace Paytm Mall. The news came out as Softbank is still undecided on selling some of its minority stake in its rival Flipkart.
One person in know said that the bank could be freed from a clause in its agreement with Flipkart; the said restriction prevents Softbank from investing more than $500 million in Paytm Mall until 2020.
In the previous month, Softbank agreed to invest $400 million for 21 percent stake in Paytm Mall. According to the other person, Softbank has held continuous talks to invest as much as $3 billion in the company.
The two added that the deal with Paytm Mall would only proceed if Softbank finalized its exit from Flipkart. According to reports, tax implications and a further increase in valuation for Flipkart holds Softbank from selling over its 20 percent shares.
A spokesperson for Softbank declined to comment.
Softbank Vision Fund invested about $2.5 billion in Flipkart in August 2017 after a failed attempt to orchestrate with Snapdeal. Snapdeal was the Japanese bank’s first bet in the Indian online retail space in 2014, investing about $900 million. The deal gives hope in giving a challenge to Flipkart’s market surge; however, the company slipped to a distant third behind Amazon India in 2016.
More on Paytm Mall
According to Forrester Research, Paytm Mall had a market share of 5.6 percent in its first year of operations in 2017, and its gross merchandise volume or gross sales reached about $1 billion.
The company ended the 2017-2018 fiscal year with annualized GMW of $3 billion. Moreover, the company targets a whopping $10 billion in annualized GMW at the end of the current fiscal year.
The e-commerce market focuses mainly on its online-to-offline (O2O) model; it drives almost 60 percent of its total sales through partnership with 75,000 stores. The company plans to triple its offline presence at the end of 2019.
A consultancy firm RedSeer confirmed that the O2O strategy has been moderately successful in India.
Anil Kumar, RedSeer’s CEO, said, “An O2O strategy works fairly well in an unorganized retail market like India. It helps retailers survive in a tech world and gives a significant value-add for customers by offering a large assortment of local flavors. The fundamental system is great, but it takes a lot to execute on the ground. It’s still early days for Paytm.”
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