SoftBank, Elevation Capital’s stakes turn junk as Paytm Mall loses (Jack) Ma

“Mere paas Ma hai, Jack Ma” (I have Ma, Jack Ma), Paytm founder Vijay Shekhar Sharma had proudly told a business news agency in November 2017 when asked about how we would be bankrolling his future capital needs, taking a line out of one of Bollywood’s cult classics.

He was referring to the backing of Alibaba founder Jack Ma, a key backer of the Paytm group. Indeed, Alibaba and associated group firm Ant Financial still own nearly a third of Sharma’s flagship One 97 Communications Ltd, which houses the eponymous Paytm wallet.

But the Chinese companies are now exiting Paytm Mall, the ecommerce unit of the group that never really took off but boasted of a $3-billion (over Rs 22,000 crore) valuation by private investors as recently as two years ago.

Paytm E-commerce, the company that houses Paytm Mall, will buy back and extinguish the shares owned by the Chinese backers who currently own over 40% stake in the company. SoftBank and Elevation Capital are the other two stakeholders with over 10% each in the company.

Paytm Mall has been valued at just around Rs 100 crore in the just concluded deal, in another setback for the group that has seen the share price of One 97 Communications lose over two-thirds value within months of going public.

VC firm Elevation (formerly SAIF Partners), which has been an early backer of Paytm and remains a key shareholder of the listed company, became a stakeholder in Paytm Mall as it was demerged from Paytm over five years ago. It had pitched in with around $23 million in a $200 million round led by Alibaba in 2017. That deal had reportedly valued the ecommerce venture at $1 billion.

While Elevation is still sitting on a huge unrealised profit on One 97 Communications, despite the share price plunging in the public markets, its stake in Paytm Mall has virtually turned to junk.

SoftBank’s investment in Paytm Mall, too, has faced a similar fate, as has eBay’s. The Japanese investor is also a large minority shareholder in One 97. eBay had invested in Paytm Mall at a valuation of $3 billion in 2020. The American company had also lost its shirt on its bet on Snapdeal, but however made up via its bumper harvest from Flipkart. Walmart-controlled Flipkart had acquired eBay’s India business a few years ago.

Paytm Mall said it is pivoting to the Open Network for Digital Commerce (ONDC) platform to explore export opportunities.

“Keeping in mind our attention to building an open platform for e-commerce, our @PaytmMall’s business now be built on @ONDC_Official. It will be cost effective, scalable and bring even larger impact to small businesses,” tweeted group founder Sharma.

The ONDC was created by a set of private and public-sector banks and other financial institutions. It had a soft launch last month. It aims to disrupt ecommerce with an open network for sellers and buyers as against closed ecommerce platforms.