Paytm Mall has was a classic example of however things will quickly flip south in business if fundamentals area unit is unnoticed. simply 3 quarters agone, it had been the third largest Indian e-commerce company splurging SoftBank and Alibaba capital on cash backs and freebies.
Fast forward in October-November 2018, Paytm Mall completed that it can’t sustain the cashback driven play and resorted on downscaling consumer-facing business (company’s loss in FY 2017-18 was ~$250mn). As a fallout of downscaling, it went through huge leadership and middle management attrition whereas facing the seller’s flak for unsold inventories.
Also, there are queries raised around royalty payments/customer access fees to the tune of $100mn from Paytm Mall to Paytm’s payments business.
Nevertheless, Vijay Shekhar Sharma, founding the father of Paytm Mall has been denying the existence of any issues ever since our report in January this year. Enough aforementioned and done, what’s new within the cashback house?
Paytm Mall has been engaged in talks with eBay for potential funding up to $200 million, in line with 3 reliable sources.
“While the spoken language has been happening for a few time, it’s unclear at now if the deal could fructify,” additional 2 of the aforesaid sources on condition of namelessness. just in case the deal materializes Paytm Mall can have to be compelled to bear an enormous haircut in valuation.
“Paytm Mall might be valued as less as $600 to $800 million,” aforementioned sources. The e-commerce marketplace was valued regarding $2 billion once it raised $445 million from SoftBank and Alibaba in Apr last year.
Importantly, the talks of eBay investment within the firm surfaced once eBay relaunched its business in the Asian nation when breaking apart with Flipkart. For context, eBay had noninheritable five.4 percent stake in Flipkart for $514 million money and surrendering native operations (eBay.in).
“This is probably going a bottom fishing exercise by eBay wherever it should get to take a position at a valuation doubtless less than total capital raised by Paytm mall. Even at that valuation, it’s unclear if it’s a prudent investment to create,” printed one among the 3 sources.
Spanning across 2 rounds, Paytm Mall had closed regarding $645 million in total funding. At present, Alibaba’s Singapore entity owns thirty.15 percent stake within the firm whereas SoftBank holds a bit over twenty-one percent.
Responding to Entrackr queries, Vijay Shekhar Sharma aforementioned that evaluation is off by 5X. Probably, he meant to mention that the valuation of the firm is in tune of $3 billion.
Meanwhile, eBay’s world advocator replied, “We don’t treat rumors or speculation.”
Hived far from the parent entity – One97 Communication in late 2016, Paytm Mall took one among the shortest durations to become an imaginary creature. This was achieved on the rear of the tried and tested cashback model of Paytm itself, a model that sadly did not work for Paytm mall.
Since eBay had resumed its operations within the country simply seven weeks agone, it’s quite puzzling why it might build a minority investment in Paytm Mall, around that there’s a general agreement that the business lacks any coherent strategy.
There is speculation that the investment could also be to induce an area partner for cross border e-commerce, however, it’s unsure why eBay would build AN investment for that. they might partner with all marketplaces in the Asian nation and maximize demand while not golf stroke all their eggs in one basket. Marketplaces seldom say no to a lot of choices.
Even with a $ two hundred million investment (though, it’s doubtless aloof from being final), it’s unsure however Paytm Mall can contend against well-capitalized Amazon and Flipkart, still as a resurgent Snapdeal. whereas on one hand eBay presently lacks any material capabilities within the Indian e-commerce market, on the opposite hand, Paytm Mall lacks sturdy organic client demand within the country.
Given that eBay is thought to pursue conversations for months so lose interest (there was even speculation that they’d get ShopClues at a throwaway worth last year), the likelihood is that this engagement meets an analogous fate. we’ll update the story as and once we get a lot of info on this front.