Paytm to get SoftBank’s back

Japanese internet and telecom group SoftBank is in early discussions with digital payments and commerce platform Paytm for an investment, told sources.

The development comes at a time when Paytm has emerged as one of the suitors to buy the SoftBank-backed Freecharge, as reported by TOI in its April 6 edition.

SoftBank is the largest investor in the beleaguered online retailer Snapdeal, which owns the mobile wallet firm Freecharge. The Masayoshi Son-led group is orchestrating a merger between Snapdeal and its bigger rival Flipkart -- TOI first reported in its March 28 edition -- as it consolidates its position in India.

One97 Communications, the parent of Paytm, has also held talks with investors like Canada Pension Plan Investment Board (CPPIB) to raise up to $1 billion in a new financing round which may value it at $6 billion. People familiar with the development said SoftBank is looking to get a foothold in Paytm's payments business by pumping capital into it while selling Freecharge to the Vijay Shekhar Sharma-founded firm at a discounted price of about $200 million. SoftBank's talks with Paytm for fresh funding are being held separately, these sources added.

A SoftBank spokesperson said they won't comment on speculation, while an email sent to Paytm's Sharma did not elicit a response till the time of going to press. "The discussions are still preliminary. If the talks reach a conclusion, SoftBank is ready to back Paytm with long-term plans," a person aware of the development told TOI. SoftBank has ploughed around $2 billion across consumer internet startups in India since 2014, having taken bets on Snapdeal, Ola, Oyo Rooms, Grofers and Housing.

For Paytm, getting SoftBank as an investor would mean it can afford to invest in the market and continue building the business without rushing to get to profitability. Paytm's recently separated commerce business has already got $200 million in fresh funding led by Chinese e-commerce giant Alibaba. Paytm's commerce business, under Paytm Mall, is being seen as primary vehicle of Alibaba's commerce play in India against Amazon and Flipkart.

Incidentally, Paytm, which obtained an in-principal approval for opening a payments bank, has yet to begin its operations. Paytm's Sharma had said that he was looking to kickstart its payments banks by March from Uttar Pradesh. Sources said the central bank has questioned the board configuration of the payments bank.

Last year, Taiwan's Mediatek had put $60 million in Paytm at a valuation of $4.8 billion. At the time, sources had said the round would see a new set of investors joining in at a later stage. Chinese international conglomerate and investment firm Fosun, Singapore's sovereign wealth fund GIC, Foxconn and Temasek have also held discussions with the Alibaba-backed company.