One97 Communication-owned fintech company Paytm is in talks to buy Mumbai-based insurance firm Coverfox in an all-cash deal worth $100-120 million, The Economic Times reported, citing sources aware of the developments.

If the transaction goes through, Paytm will emerge as a direct competitor to insurance aggregator PolicyBazaar, the report said. The size of the deal will also make it the largest acquisition for Paytm, which is venturing into the financial services space with its arm, Paytm Money.

However, Paytm may encounter hurdles in finalising the deal as Japan's SoftBank, which has invested in Paytm parent One97 Communication, also has a significant shareholding in PolicyBazaar, the report added.

"The Paytm board is in the process of finalising the contours of the deal. There is still a chance that it may fall through as the board deliberates on the pros and cons of the transaction", The Economic Times quoted one of its sources as saying.

Coverfox, co-founded by Varun Dua and Devendra Rane in 2013, is in talks to raise $50 million in series D round, even as talks regarding the Paytm acquisition are going in parallel, another source told ET.