Early talks around merger of Paytm-Snapdeal, Alibaba plays key role

Recently, talks about a merger between Paytm’s marketplace and Snapdeal in an all-stock transaction surfaced, but according to people familiar with this development, whether the deal will happen is not certain and that if all stakeholders agree, talks may resume again.

According to the experts, the key player here is Alibaba, which has a 40% stake in Paytm and around 3% in Snapdeal. Paytm has spun off the marketplace business into an entity called Paytm E-commerce Private Limited, which is raising capital from Alibaba and SAIF Partners. The other important player will be Japanese major SoftBank, which is a major investor in Snapdeal, and also has a substantial stake in Alibaba.

“Snapdeal and Paytm have held talks to merge and this deal is driven by Alibaba,” one person familiar with the matter, told ET.

Since Paytm has a payments bank licence, it now has a deadline of March 31 to spin off its marketplace, as mandated by the Reserve Bank of India.

Another expert said that the recent capital infusion by Alibaba Group in Paytm’s marketplace will also be a factor in any deal.

It was earlier reported that Alibaba is leading an investment round of Rs 1,350-1,700 crore in the online retail marketplace of Paytm, marking the formal entry of the Chinese major into a market where it will now compete with America’s Amazon and India’s Flipkart.

“The managements of Snapdeal and Paytm are waiting to see how the two companies fare in the first two months of 2017,” an experts told ET.

Snapdeal, which has seen value erosion in the past few quarters, is now being valued at $3-3.5 billion, down from the last fund-raising round that pegged it’s valuation at $6 billion.