Paytm to raise up to $1.5 bn as Flipkart-Snapdeal merger nears

Electronic payments provider Paytm is in talks with Japan's SoftBank Group to raise $1.2 billion to $1.5 billion in cash, making SoftBank one of the largest shareholders in the fintech start-up, Mint newspaper reported today citing sources.

The deal, which could increase Paytm's valuation to $7 billion to $9 billion, will see SoftBank buying some shares from existing Paytm investor SAIF Partners and founder Vijay Shekhar Sharma beside investing money in the company, the report said.

The media has been reporting that SoftBank is keen to sell its stake in Indian ecommerce firm Snapdeal in exchange for a stake in market leader Flipkart.

Paytm may also buy Snapdeal-owned payments rival Freecharge as part of the deal, the report said.

Meanwhile, another report in The Economic Times says Bengaluru-based Flipkart has appointed Goldman Sachs as an advisor for the ''proposed acquisition'' of Snapdeal.

The report said that the investment banking major will work closely with Snapdeal's advisor Credit Suisse in what could be the biggest merger in Indian internet commerce history.

Quoting unnamed sources, the ET report said that ''the final offer for sale is likely to be finalised over the coming weeks''.

The report also said that Kalaari Capital and Nexus Venture Partners - early investors in Snapdeal - have given the green signal for the merger between the two homegrown rivals.

Last week, Flipkart had announced its acquisition of eBay.in as part of a $1.4 billion (Rs9,000 crore) fundraising round. It had secured the money from Chinese Internet giant Tencent Holdings Ltd, US-based online retailer eBay Inc and software giant Microsoft Corp.

Flipkart's other major investors include Naspers Group, Accel Partners and DST Global.

So far, Snapdeal has raised about $1.65 billion from about two dozen investors, including SoftBank and SoftBank-backed Chinese ecommerce company Alibaba, Taiwanese contract electronics manufacturer Foxconn, global online marketplace eBay Inc, Indian media company Bennett Coleman & Co Ltd, and venture capital investors such as Bessemer Venture Partners, Intel Capital, Iron Pillar, Kalaari Capital and Ratan Tata.

Most Indian ecommerce firms have spent heavily on discounts and marketing over the past few years to build a strong customer base before working towards profitability. This has resulted in huge losses for some of the top ecommerce companies.

In an email correspondence with employees, last week, Snapdeal co-founders Kunal Bahl and Rohit Bansal had claimed that the ''well-being of the entire team'' was their top priority. It said the founders were working with investors to ensure there was no disruption in employment.

However, as VCCircle points out, most promises seemed undone by an admission in the letter that the ''investors were driving the discussions around the way forward'' - implying that they were the ones calling the shots and the founders have little, if any, say in the way things turn out in the near future.