The headquarters of Alibaba Group Holding Ltd in Hangzhou, Zhejiang province. Zhejiang Ant Small & Micro Financial Services Group Co, an affiliate of Alibaba, has agreed to buy 25 percent of Indian payment services provider One97 Communications. [Photo/Xinhua]
An investment in an Indian payment service provider made by Zhejiang Ant Small & Micro Financial Services Group Co, an affiliate of Alibaba Group Holding Ltd, has two goals.
One is to get a share of the e-payment market in India, while the other is for parent Alibaba to expand into that country's underdeveloped e-commerce sector.
The Hangzhou-based Ant Financial has agreed to buy 25 percent of Indian payment services provider One97 Communications, tapping into the potentially huge online retail market in India, according to a statement on Thursday.
The companies did not reveal the size of the investment, but a person who is familiar with the deal said the stake was worth more than $500 million, Reuters reported on Friday.
One97 runs Paytm, an online platform through which users can shop or pay utility bills.
Ant Financial runs Paytm's Chinese peer Alipay, which has 190 million mobile users.
By contrast, Paytm has just 23 million users of its mobile payment service in India.
Under a strategic partnership agreement, Ant Financial will offer strategy and technology support to Paytm.
By leveraging Alipay's technology and experience, Paytm has the potential to be as dominant in India as Alipay is in China, said analysts.
"As India's online retail market develops, the idea is that Paytm will be the market leader in online and mobile payments, so Ant Financial would profit from the market's growth," said Neil Flynn, portfolio manager at Alcuin Asset Management.
Han Xinyi, vice-president of Ant Financial, noted in a statement that India has a population of more than 1 billion. "The potential of its untapped payment market is huge. With smartphones rapidly penetrating into Indian people's daily lives, we see great opportunities in mobile payment."
And through the investment by Ant Financial in Paytm, Alibaba will benefit from the development of the country's online retail market.
As the Paytm system becomes more popular, it will be easier for Alibaba to launch its business-to-consumer platform Tmall in India, said Flynn.
Analysts said that the Indian online retail market can be compared with that of China 15 years ago, in terms of demographics, income inequality and consumption habits.
Will Tao, an analyst at market research firm iReseach Consulting Group, said it makes sense for Alibaba to expand into emerging markets, which offer much better opportunities and larger profits than mature markets.
Alibaba is not the only e-commerce giant moving into the Indian market. For example, United States-based Amazon.com Inc launched an online shopping site in India in 2013.
But Tao said it is possible for Alibaba to compete with Amazon in India.
"The Chinese e-commerce company has the financial resources and the technology to replicate a similar success in India," he said.
Emma Gonzalez Miguel contributed to this story.