SoftBank makes its biggest investment in India, pumps $1.4 billion into Paytm

Paytm founder and CEO Vijay Shekhar Sharma posts a selfie with SoftBank chairman Masayoshi Son, while announcing the mega deal in a blog post. Photo credit: Paytm.

Paytm today announced an investment of US$1.4 billion by Japanese giant SoftBank in its parent company, One97 Communications. This is the largest funding round by a single investor in India. Tech in Asia reported a month ago that the deal was being negotiated.

“This investment will help us grow our leadership in the country’s payment ecosystem, expand our user base, and build a suite of financial services products for our customers,” Paytm says in a blog post.

This investment will help us grow our leadership in the country’s payment ecosystem.

Paytm, which also has backing from Chinese giant Alibaba, recently split into two: Paytm Ecommerce and Paytm Payments Bank. Alibaba made a fresh investment of US$200 million to take the lead in the ecommerce arm and prepare for a direct face-off with global rival Amazon and India’s Flipkart, which also raised US$1.4 billion last month in a round led by Alibaba’s Chinese rival, Tencent.

The SoftBank investment reduces Paytm’s dependence on Alibaba. This will allay concerns over Chinese influence over the sensitive area of payments and financial services, and strengthen Paytm’s bid to disrupt banking in India. It recently obtained a licence to run a payments bank – a special entity created in India which is limited to enabling payments with a larger scope than a wallet, but restricted in giving out loans.

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This is SoftBank’s biggest investment in India, lending weight to its chairman Masayoshi Son’s recent reiteration of his long-term commitment to the India story. The Japanese hedge fund’s other major bets in India are Flipkart’s rival Snapdeal, Uber’s local rival Ola, and Oyo Rooms.

Snapdeal has been struggling after losing market share to Amazon, and SoftBank is in the process of selling it to Flipkart at a small fraction of its peak valuation. This hasn’t deterred SoftBank from continuing with its investments into India’s consumer internet space.