eBay picks up 5.5% stake in Paytm Mall

US-headquartered ecommerce firm eBay Inc has picked up a 5.5% stake in ecommerce marketplace Paytm Mall for an undisclosed amount besides striking a commercial agreement, according to a statement by eBay.

eBay will bring its global inventory onto Paytm Mall’s consumer-facing ecommerce platform. The agreement was formally struck sometime in the last several weeks, eBay said in its regulatory filings,  without mentioning a specific timeline.

“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 access to eBay’s unparalleled selection of goods,” Jooman Park, senior vice president, Asia Pacific, eBay, said.

Paytm, which also includes Paytm Mall among its other business verticals, currently claims to have over 450 million registered customers, 130 million active users, and over 12 million registered merchants.

While last known numbers available on the public domain indicate that Paytm Mall has a little over 10 million merchants registered on its platform, the number of customers or active users of the platform is not known.

“This new strategic collaboration will ensure Indian consumers are given greater access to eBay’s vast selection of inventory,” Rudra Dalmia, executive director,  Paytm Mall, said.

The deal value was pegged at $150 million, The Economic Times reported, earlier in the day, citing unnamed sources directly familiar with the deal.

A specific e-mail query sent to Paytm seeking more information on the size of the investment did not elicit a response at the time of filing this report.

The development comes a little over four months after online media publication Entrackr had first reported about the potential deal, which was pegged at close to $200 million.

The development comes amidst speculations that Paytm’s ecommerce division has been undergoing a crisis of relevance in an ecommerce market dominated by Walmart-owned Flipkart and Amazon. 

Media reports have also talked off a potential shutdown of Paytm’s B2C (business to consumer) operations while focusing more on B2B (business to business). Vijay Shekhar Sharma, founder and CEO, has denied any such moves.

Paytm Mall was launched in 2017. In April last year, TechCircle reported that Paytm Mall’s parent firm Paytm E-Commerce Pvt. Ltd was raising $446 million (Rs 2,892.50 crore then) from Alibaba and SoftBank. In all, it has raised more than $600 million (not including the $150 million reported now) so far.

In addition, its biggest investors -- Chinese e-commerce giant Alibaba and Japanese investment behemoth SoftBank -- appear to have cooled down amid mounting losses, a phenomenon that has been attributed to the highly discount-driven and cashback-led e-commerce strategy of Paytm.

Paytm Mall’s losses mounted to Rs 1,787.5 crore for the financial year ended March 2018. Operating revenue, however, rose to Rs 744.1 crore in 2017-18.

Industry experts that TechCircle had previously spoken to said that while the eBay investment might not be enough to effect a reversal in fortunes for Paytm Mall, it could just send a positive signal to the ecosystem and keep it in the hunt. Besides, eBay’s expertise in running a global marketplace could help bring about effective changes in the way business is done at Paytm Mall.

However, the move by eBay does have a strategic relevance as it would mean making a re-entry into the India market. eBay had sold its holdings in Flipkart for about $1.1 billion after the Indian e-tailer was acquired by US retail giant Walmart last year. 

While eBay had an early-mover advantage in India, its pure-play marketplace model struggled to cope in the face of heavy investments from younger rivals Flipkart, Snapdeal, and Jeff Bezos-led Amazon.