New Delhi: Paytm E-Commerce Pvt. Ltd is close to raising $180-200 million (around Rs1,210-1,350 crore) in an investment round led by Chinese internet giant Alibaba Group Holding Ltd, valuing the online retailer at about $1 billion, said two people familiar with the development.

The funding round will take the stake of Alibaba and its affiliate Ant Financial in Paytm E-Commerce, an entity newly created by One97 Communications Ltd to house the online retail business, to more than 50% from 42%, the two people said on condition of anonymity.

One97 was valued at $5 billion the last time it raised about $60 million from new investor Mediatek in August-September 2016. E-commerce makes up about 20% of One97’s business.

A deal will confirm that Paytm will continue to be the vehicle for Alibaba’s e-commerce play in India. In 2016, the Chinese online retailer contemplated a standalone entry into India or an acquisition. For now, the company has decided to raise its stake in Paytm for its e-commerce ambitions to play out in India, the two people cited above said.

Paytm’s Vijay Shekhar Sharma sells 1% in One97 Communications for Rs325 crore

Paytm is expected to spin off the e-commerce business into a new mobile application and a separate website this month, the people said. The new platform will be named PaytmMall—inspired by Alibaba’s T-mall in China. The existing Paytm app will continue to have a link to the commerce business.

One97 Communications’ existing shareholder SAIF Partners is likely to participate in the upcoming investment round as well, the people mentioned above said.

A spokesperson for Alibaba declined to comment on the company’s funding plan. “While we are excited about addressing the market opportunity in India, we are not in a position to share any forward looking information with you at this moment," the spokesperson said in response to a query.

ALSO READ | Vijay Shekhar Sharma, the cashless campaigner

Paytm did not respond to an emailed query from Mint. SAIF Partners declined to comment.

Paytm E-Commerce was incorporated on 16 August and its shareholding structure mirrors that of parent One97, with large shareholders such as Alibaba.com, Singapore E-commerce Pte. Ltd, Alipay Singapore Pte. Ltd, SAIF Partners and founder Vijay Shekhar Sharma, among others, documents filed with the Registrar of Companies show.

Alibaba, which already runs a business-to-business platform in the country, will help Paytm in hiring more senior executive staff and will deploy some of its executives from China, one of the two people mentioned above said.

The company has already hired former Bain Consulting executive Bharati Balakrishnan as the head of its Indian operations. Balakrishnan will now work closely with the Paytm E-Commerce team. The online retailer will be run by Sharma for now .

Paytm, which started out as a mobile payments and mobile recharge business, today ranks among the top three consumer Internet companies in the country. The company has aggressively built its e-commerce marketplace during the last two years by selling apparel, footwear, smartphones, bus tickets and movie tickets.

It has created a web of payment solutions in the offline and online channels where consumers can transact via the Paytm wallet.

Paytm’s payments as well as the e-commerce business has grown more than five-fold since the Indian government on 8 November invalidated high-value currency notes, triggering a cash crunch.

The company said in November that its gross merchandise value—or value of goods sold through the digital platform—had crossed $5 billion. About 20-25% of this came from Paytm’s e-commerce marketplace.

Founder Sharma is one of the 11 recipients of the Reserve Bank of India’s payments bank licences and is all set to launch a payments bank by the end of this month.

Subscribe to Mint Newsletters * Enter a valid email * Thank you for subscribing to our newsletter.

Share Via