BENGALURU: Paytm will spin off its marketplace business next month, a top company source said, setting the stage for China’s Alibaba to establish a direct presence in the hotly competitive Indian online retail space.“The contours of the spinoff, paperwork and board members are being finalised and the official launch is planned in November,” said the source.ET was the first to report in March that Paytm was considering the spinoff plan. Ahead of the separation, Paytm is planning its own three-day festival sale starting October 12, and a key selling point will be cashback offers totalling over Rs 100 crore by merchants on its platform.The sale will focus on customers in smaller towns and cities and categories including kitchen, fashion and home furnishings.“India is an important market and Paytm is an important strategic partner,” an Alibaba spokesperson said, declining to comment on speculation regarding the spinoff.Paytm declined to comment on the spinoff. The big three of Indian online retail — Flipkart Amazon and Snapdeal — conducted their festival sales in the first week of October, surpassing industry expectations of lukewarm response from buyers.More discount sales are in the offing before Diwali at the end of the month, and Snapdeal is already off the blocks with another sale which begins the same day as Paytm’s.The Indian online retail market is dominated by Flipkart and Amazon, and the former is in talks for a financial and strategic backing from America’s Walmart The Alibaba group has been present in India through Paytm and Snapdeal, and a direct entry for the Chinese ecommerce group is expected to heighten competition and result in a shakeout in the industry. In August, ET reported that Alibaba plans to debut its business-to-consumer site Tmall in India, with Kishore Biyani’s Big Bazaar being one of its key sellers.“We expect 10 million transactions in three days,” said Saurabh Vashishtha, the vicepresident for business and product management of Paytm’s ecommerce marketplace. “This year we have lined up total benefits of more than Rs 1,000 crore including cashbacks and discounts on three days of the Maha Bazar Sale.”Snapdeal’s sale will feature offers on electronics, fashion and home products, its head of category management, Saurabh Bansal, said, adding the company sold 11 million products during its first sale earlier this month.Last week, India’s largest online retailer Flipkart said it sold over 15.5 million units during its five-day festive sale, slightly more than rival Amazon India, which sold over 15 million units.The Bengaluru-based company also met its target of $500 million in gross sales, including fashion retailer Myntra, boosted primarily by sale of exclusive smartphones and large appliances such as televisions.According to Satish Meena, a forecast analyst at Forrester Research, the online retail industry would have clocked gross sales of a maximum $1 billion without accounting for returns of 15-20 per cent.“Most of the increase in sales is from an increase in wallet share and not new buyers, and the industry is churning the same 60-70 million buyers,” said Meena.