SAIF and GIC exit Little Internet for little stake in Paytm: Decoding trajectory

Let’s start from the beginning. In 2015, founders of Zovi raised $50 million from Paytm, SAIF Partners and Tiger Global to launch a deal-centric app called Little.

This was the attempt by both the founders to tap into the O2O market which was estimated to go up to $64 billion by 2016 at that time.

But as we all know, that didn’t fare very well. Despite raising the impressive amount and cornering bluechip backers, it miserably failed to take off. In fact, we have never found someone hunting deals on Little. It won't be an exaggeration if you consider that - the firm never came out of stealth mode.

So to save this sinking ship and its reputation later in 2017, Paytm acquired both Little and Nearbuy with $30 million investment and merged the two entities to strengthen the hyperlocal deals market under one umbrella.

That also didn’t fare very well. In fact, the combined entity seems to have the same fate as Little.

So last year, without getting noticed by anyone, two investors decided to bid farewell to a significant stake in the little known Little. SAIF Partners and another investor named GIC, a Singapore-based VC, made an under the table deal with Paytm.

Here they swapped double-digit stakes in Little for a decimal figure stake in Paytm.

Filed in a strictly private and confidential document with MCA, it was reflected that on 24 October 2018, Paytm allowed SAIF Partners to sell their 27 per cent stake* worth Rs 100.06 crore in Little Internet Pvt. Ltd. and acquire 0.22 per cent stake* worth the same amount in the holding company One97 Communications Ltd.

At the same time, GIC let go of 20 per cent stake* worth Rs 72.52 crore for 0.16 per cent* shareholding in Paytm worth the same amount.

About 24 days before the date of the transaction, a valuation report was published where Little Internet was valued at Rs 364.05 crore ($ 50.21 million). Meanwhile, Paytm was valued at about Rs 44,713.99 crore ($6.17 billion) on the same date.

Queries sent to Paytm's PR team and Chopra by Entrackr didn't elicit immediate responses. We will update the post as they respond.

It makes perfect sense for SAIF and GIC to swap their shares in Little for even a minor stake in Paytm. Little, even after an initial investment of $50 million and later being merged with Nearbuy was still valued at around the same figure. If that doesn’t speak for a stagnant business with no or little traction, we don’t know what else will.

Meanwhile, Paytm’s business, even with piling up of losses, grows every day. And so does its valuation, creating a larger money-making opportunity for the investors in Paytm than a confirmed loss in Little.

For Paytm, which was already a majority stakeholder in Little, and is also the holding company, it made sense to give exit to larger stakeholders and save its portfolio from public and media scrutiny. Why? Because of a probable plan to kill the online deals marketplace, little by little.

This, of course, is an estimate riding on an uncertain knowledge regarding the stakeholding of Tiger Global and the founders Manish Chopra and Satish Mani.
For now, we only know a little about Little since its start. But is this the end? We'll find out with time.

*All the figures illustrating stakes of the two investors in the two companies are approximate round off of exact figures.