Alibaba’s Big Indian Bet

Chinese e-commerce giant Alibaba and its financial-services affiliate have agreed to invest $575 million to jointly in India’s One97 Communications Ltd.’s online-payment and marketplace businesses, sources familiar with the matter told The Wall Street Journal.

The deal, if it goes through, would give Alibaba and Zhejiang Ant Small & Micro Financial Services Group 30 percent on One97 between them and push the valuation on the Indian-marketplace to over $2 billion.

“We will communicate as and when we complete the process,”a spokeswoman for One97 said, noting only that the company is in the process of raising money.

Alibaba had no immediate comment on the matter.

This investment would represent China’s 800 pound e-commerce gorilla’s first investment in India’s small, but rapidly expanding, e-commerce industry. Alibaba is not along in its interest,  Amazon.com, Japan’s SoftBank Corp. and many others are betting on the emerging economy’s potential e-commerce boom. There are also local players such as FlipKart to contend with.

One97’s Paytm unit would be the beneficiary of the infusion of investment dollars. Paytm also handles online payments and operates an Internet marketplace that is accessed by Indian shoppers via mobile phone. The move is consistent with Alibaba’s recent push, since its record breaking IPO in the U.S. in September 2014, to expand its services outside China’s border, offer Chinese merchants a more international line-up of potential customers, and Chinese consumers a richer offering of international goods.

Paytm claims its marketplace has about 15,000 merchants, and about 25 million registered users. It also has 20 million mobile-wallet users and counts taxi-hailing service Uber Technologies Inc., travel portal Expedia Inc. and apartment-rental site Airbnb Inc. among its customers.

Chinese regulatory approval is required under the news agreement. It will also allow Indian customers to shop on Alibaba sites by making payments through Paytm, while Chinese customers can use Alipay to buy from merchants selling on Paytm’s marketplace.

Paytm intends to use Aliaba’s forthcoming investment to expand marketplace operations and develop payment technologies,  the Indian company will also now have access to Alipay’s payment technologies to help develop their own.