SoftBank’s next big bet in India likely to be $1.5 billion in Paytm

Masayoshi Son at SoftBank World 2016. Photo credit: @SoftBank.

Japanese giant SoftBank is reported to be in talks to invest US$1.5 billion in Paytm’s payments arm, Mint has reported citing unnamed sources. Tech in Asia has independently learned that a deal is under negotiation, but it has not yet reached a definitive stage.

Alibaba-backed Paytm 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 become a direct player in the Indian market. It takes on global rival Amazon and India’s Flipkart, which also announced US$1.4 billion funding earlier this month.

Paytm founder Vijay Shekhar Sharma sold a part of his stake in parent company One97 to invest in Paytm Payments Bank, which includes its popular digital wallet. The payments bank is a new entity in India limited to handling digital payments, which can hold higher deposits than a wallet but can’t give loans.

See: Paytm founder prepares for his next pivot, which could be the biggest yet

The Alibaba-backed company has had to respond to concerns over Chinese influence on an Indian banking entity. “We’re as Indian as Maruti (auto company whose majority stake-holder is Suzuki from Japan),” retorted Vijay Shekhar Sharma, while Paytm elaborated the point in a blog post: “Paytm Payments Bank is 51 percent owned by Vijay Shekhar Sharma & 49 percent ownership is with One97 Communications. Paytm Payments Bank is a truly Indian company owned and operated by Indians.”

A SoftBank investment in Paytm would therefore reduce its dependence on its main investor Alibaba and remove the “Chinese connection” distraction as it seeks to disrupt payments and banking in India. SoftBank already has an indirect stake in Paytm, because it is an Alibaba shareholder.

The Paytm investment would be SoftBank’s biggest bet in India, where it earlier made large investments in Snapdeal, Ola, Oyo Rooms, and Housing. SoftBank is currently negotiating the sale of Snapdeal to Flipkart.

See: Snapdeal sale to Flipkart closer, but not a done deal yet: the real story

The Japanese giant aims to be a major player in India, with SoftBank CEO and chairman Masayoshi Son recently saying he would top the US$10 billion investment in India he had pledged earlier.