Paytm has emerged as the largest Indian startup and the only ‘Decacorn’ amongst the numerous unicorns. It is currently valued at over $11 billion and it is far ahead of the second one that is Ola. Paytm belongs to the Noida based One97 Communications Ltd.
Paytm is the largest online payments platform in India. The real growth started to occur immediately after the introduction of the demonetization move by the Indian government in November of 2016. The move revoked the validity of the ₹500 and ₹1000 currency notes. This allowed for the growth of the digital payments in India and Paytm emerged as the largest of all.
The growth of Paytm also lured numerous big names for investment. The biggest of all was Alibaba. Through its investment arm, Ant Financial, Alibaba owns around 30% of the stakes in Paytm. Alibaba has expertise in online to offline retail and they wanted to recreate the same in India as well.
Paytm Mall, which is based on Alibaba’s Taobao Mall or TMall was launched in 2016. It was expected that with the involvement of the Chinese giant, Paytm Mall would take off really nicely. However, the situation never got in their favour as the Indian e-commerce market was dominated by two giants Flipkart and Amazon. Moreover, in 2018, Flipkart, the largest e-commerce player in India sold majority stakes to American retail giant Walmart. This gave them another boost to challenge the rapid growth of Amazon in India. In the clash of the titans, Paytm Mall lost the battle without even getting a chance to fight.
It should be noted that Paytm’s real strength was never e-commerce. The real strength of the company was digital payments and it still holds its grounds as the number 1 player in the market. After the introduction of the UPI based payments, the transaction on the Paytm platform has increased significantly. However, what is worrying, is the competition. There are several other digital payment applications in the Indian market that have popped up in the last couple of years. Flipkart’s payments arm PhonePe, Google Pay and Indian Government’s BHIM UPI APP are all rising rapidly and it seems that the day is not far when Paytm will be lingering somewhere below the above-mentioned names.
This is a worrying situation for the app as it was once the largest talk of the tow just after demonetization as every other person was using the app for digital payments. It helped the country in a major way to become a somewhat cashless economy. Now, that the country has become significantly cashless, and with the advent of the new apps, Paytm is struggling.
Alibaba has been supportive of the company for long now. The growing losses and no signs of respite in the near future have made Alibaba wary of the situation. In the recent past, Alibaba has started diluting their hold in Paytm. Other players such as Softbank’s Vision Fund and eBay have invested in Paytm in the recent past.
Alibaba is evaluating its large investments in India. According to sources, the retail giant is planning to break its large chunks of investments and start focusing on the smaller investments.