Paytm Mall's valuation down 99% after Alibaba, Ant Financial's exit
What's the story
Paytm Mall, One97 Communications' e-commerce arm, saw a significant drop in valuation as its key backers Alibaba and Ant Financial exited the firm. The bowing out of its lead investors has put the company's value at around $13 million, a nearly 99.5% drop from 2020's valuation. In 2021, the firm had dropped out of the Hurun Unicorn Index with a valuation below $1 billion.
Context
Why does this story matter?
Vijay Sharma-led Paytm Mall is going through a restructuring process after facing stiff competition in India's e-commerce space. Its inability to make a mark in the space has led Alibaba and Ant Financial to call it quits on the firm. However, it presents a unique opportunity to start at a place with less share capital and shareholders who are really invested in the firm.
Reasons
Pandemic and declining market economics played a part in exit
Before their exit, Alibaba Group held 28.34% stake in Paytm Mall, while Ant Financials held 14.98% shares. The duo have sold their combined stake in Paytm Mall for Rs. 42 crore. Paytm E-Commerce, the parent company of Paytm Mall, said that operational losses, challenges due to the pandemic, and declining market economics led the investors to call it a day.
Valuation
The company's valuation is reportedly down to $13 million
The exit of Alibaba and Ant Financial has reportedly brought down the valuation of Paytm Mall to $13 million (roughly Rs. 100 crore). In 2020, the company was valued at $3 billion. However, the company has objected to its reported valuation, saying the "exit price of any investor(s) in the company via capital reduction process is not reflective of the valuation of the company."
Future plans
Paytm Mall will concentrate on Open Network of Digital Commerce
Paytm Mall remained optimistic despite two of its lead investors offloading their shares. The company aims to pivot to the Open Network of Digital Commerce (ONDC). ONDC is a UPI-like e-commerce platform developed by the Department for Promotion of Industry and Trade. It has also called an extraordinary general meeting on May 23 to discuss the reduction of equity capital and securities premium account.