Jack Ma offloads entire stake in Paytm mall at jaw dropping valuation

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When Jack Ma led Alibaba Group invested in Paytm Mall in 2017, media and experts were quick to label Paytm mall as the Alibaba of India. However, things didn’t pan out as expected. Alibaba Group, which is the largest investor in Paytm Mall, has suddenly offloaded its entire stake in the eCommerce company.

Alibaba has sold a 28.34% stake while its subsidiary Ant Financials (Netherlands) offloaded another 14.98% stake in Paytm Mall, as reported by Mint. What is even more surprising is the valuation at which the entire 43.32 percent stake was sold. Paytm E-commerce Pvt Ltd, the parent company of Paytm Mall, paid only INR 42 crore to Jack Ma-led companies to buy the entire stock.

Paytm E-commerce stated in a statement that the company faces “unique challenges” because of the ongoing pandemic. It was faced with “declining economics” and difficult circumstances that put pressure on financial metrics. “In this backdrop, the specified shareholders (Alibaba Financial and Ant Financial) expressed their desire to exit from their investments in the company.”

The move by Jack Ma severely impacted the valuation of Paytm Mall. The company’s estimated valuation is now just INR 100 crore (US$ 13.5 million), fallen drastically from Rs 21,000 crores (US$ 3 billion) in 2020.

Paytm Mall however raised objection to reports that suggested a decrease in company valuation due to the Alibaba Group’s sale of its stake.

“The exit price of any investor(s) in the company via capital reduction process is not reflective of the valuation of the company and neither does the exit have any link to any FDI laws. One simple metric is to consider that our cash balance itself is significantly higher than the quoted number in media reports, which establishes that the suggested low Fair Market Valuation is completely inaccurate,” a spokesperson of the company said.

Paytm E-commerce announced that an extraordinary general board meeting was called for May 23rd to discuss the proposal to reduce equity share capital and the securities premium account.

Five years ago, Jack Ma backed Vijay Shekhar Sharma’s plans to end the duopoly of Amazon India and Flipkart in the Indian eCommerce market. Chinese business magnate Jack Ma had invested $200 million in Paytm Mall in 2017, which was largely inspired by Alibaba’s Tmall in China. It had raised more than $800 million, collectively, from global investors including Alibaba, Ant Financial, and eBay.

Paytm Mall is optimistic about its future prospects despite Ant Financial and Alibaba deciding to pull the plug. The company is aiming to bank upon the Open Network for Digital Commerce (ONDC) program by the government to be a dominating player in India’s future e-commerce market.

The company has also clarified that other early investors have also exited due to the revamped strategy of Paytm E-commerce to tap the market.

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