An Indian company wants to bring MLM companies to India’s largest city.
The company wants more than a million investors to back it in a deal that would see it acquire a 10 per cent stake in two online retailers, Paytm and Snapdeal.
The deal would also see the company take a 5 per cent share in the second online retailer Snapdeal in exchange for a 10-year lease on the former.
The deal comes as the country faces a major shakeup of the retail sector, with Prime Minister Narendra Modi’s government announcing last week that it would increase the minimum wage and reduce other taxes to help boost the economy.
It also set a goal to cut poverty by 50 per cent by 2022, a goal that the Modi government says is achievable.
The companies’ plan to build a business in India is ambitious.
They have already secured funding from investors, including Alibaba Group Holding Ltd, Tencent Holdings Ltd, Microsoft Ventures, Union Bank of India, Bank of Baroda and IDFC Bank, among others.
But they need more than the minimum required to take this step, said Moti Singh, co-founder and chief executive of the new online retailers.
“We have to raise a million dollars to buy all these things and we have to do this in a timely manner,” Singh told a group of business leaders in New Delhi.
He added that he believes this venture could have a positive impact on the local economy, which has been struggling in recent years.
“It’s not going to make India better.
It’s going to be the exact opposite,” he said.
Singh and the two other co-founders plan to launch the retail companies in mid-November, and he expects to get around 500 investors on board.
The plan to acquire the business is a continuation of a similar strategy that Snapdeal, owned by Alibaba, took in 2016.
The startup then used its stake in Snapdeal to acquire its other retail businesses, including a coffee and tea retailer, and to launch a shopping platform.
The latter business has since closed.
The three other companies that have entered the market are a coffee-store chain, a mobile-phone retailer and a travel agency.
Paytm, which launched in 2013, has seen success with its mobile payments business, but has struggled to make money on its mobile-payments business.
Snapdeal, meanwhile, was a pioneer in mobile payments but has yet to get much traction in the online retail space, despite its acquisition of Paytm.
The two startups have similar ideas.
The Snapdeal business focuses on online transactions, while the others are more geared towards offline payments.