US-based online marketplace eBay is picking up 5.5% stake in Paytm Mall for an undisclosed amount in its third bet on India's e-commerce market over the last decade after backing Snapdeal in 2014 and Flipkart in 2017. The deal size is pegged at a little over $150 million and will value the Noida-based company, backed by China's online commerce giant Alibaba and Japan's Softbank, at close to $3 billion, according to sources familiar the development.
TOI had reported in its March 28 edition about eBay's discussions with Paytm Mall.
The investment will come as a boost for Paytm Mall, which has undertaken a strategic shift over the last few months in the business model to offline (O2O) commerce and also tackled a cashback fraud.
The deal with Paytm Mall will help merchants on eBay from across the world sell to the consumers in India, helping it start cross-border trade it had attempted to start when it sold the India business to Flipkart. But when Walmart acquired 77% stake in Flipkart last year eBay launched India website again, which will continue to function independently post this deal.
The cross-border being driven with eBay could account for 15-20% of Paytm Mall's gross sales in the coming years.
"Wholesale commerce is taking off in India and a large part of the gross merchandise value is being driven resellers," said Vijay Shekhar Sharma, founder of Paytm Mall, adding that since the platform has cut back on incentives it will prevent misuse and it doesn't need to limit quantity purchased by each seller. Sharma calls this model of Paytm Mall as "shopkeeper commerce" and says the focus now is on expanding their capabilities.
Since its move to this model, Paytm Mall has seen average transaction value slip from Rs 1,600 to Rs 1,000 even but the repeat transactions have increased, resulting in more business from each customer, according to Sharma.
Paytm Mall also said that it has cut down its monthly losses or the burn rate to Rs 30 crore now from the peak of Rs 200 crore last year. It is looking to increase gross sales from Rs 13,000 crore in FY19 to Rs 17,000 crore in FY20 even as it cuts down spending, especially on discounts to lure customers.
Paytm Mall has till now raised a little over $600 million and was valued at about $2 billion last year. Its major shareholders include Softbank (21%), Alibaba and its payments affiliate Ant Financial (46%) and SAIF Partners (18%) besides Sharma (9-10%).
The deal for eBay comes at a time when the company has been scrutiny from activist investors and is also considering potential sale or spin-off of business in classifieds. eBay had gross sales of $95 billion in 2018 but has lagged behind Amazon in the home market in US. The company had entered the India market by acquiring Baazee back in 2004 for $50 million.
"We are deeply committed to India and believe there is huge growth potential and significant opportunity in this dynamic market," said Jooman Park, eBay Senior Vice President, APAC, in a statement. "This new relationship will accelerate our cross-border trade efforts in a rapidly growing market, providing hundreds of millions of Paytm and Paytm Mall customers with access to eBay's unparalleled selection of goods."