The companies did not provide the value of the deal, but a person with knowledge of the matter called the investment a precursor to One97 listing on the stock exchange, and said the stake was worth more than $500 million (roughly Rs. 3,094 crores).
The deal values One97 at more than $2 billion (roughly Rs. 12,379 crores), making it one of the most-valuable start ups in the country. One97 runs Paytm, an online platform through which users can shop or pay utility bills, whereas Ant runs Paytm's Chinese peer Alipay.
Alibaba spokeswoman Teresa Li and One97 founder Vijay Shekhar Sharma declined to disclose the value. Sharma told Reuters that Ant would buy new shares in his company.
Paytm has benefited from the spread of affordable handsets and internet connectivity which has turned India into the fastest-growing smartphone market in the Asia-Pacific region, according to researcher IDC.
"This partnership between Ant Financial Services Group and Paytm will foster the growth of India's digital payment ecosystem," the companies said in a joint statement on Thursday.
Ant, investing in an Indian company for the first time, will provide Paytm "with strategic and technical support for its business", the companies said.
Last month, people close to the deal told Reuters a 30 percent to 40 percent stake would be worth $550 million (roughly Rs. 3,404 crores0. One97 plans to use the proceeds to grow its mobile payment business and increase the scale of its services, they said.
"With over one billion people, India's payments market has vast untapped potential," Ant Vice President Cyril Han said in the statement.
Paytm has about 23 million users, the companies said. The $2 billion valuation of operator One97 compares with the $11 billion (roughly Rs. 68,084 crores) of Flipkart Online Services Pvt Ltd, India's biggest e-commerce company.
© Thomson Reuters 2015