In a move that would make him its single largest shareholder, Paytm Chairman Vijay Shekhar Sharma will buy a 10.3% stake worth $628 million in the firm he founded from an arm of Chinese fintech giant Ant Financial. The deal, set to be completed on Friday, will see Sharma’s Netherlands-based Resilient Asset Management BV issue optionally convertible debentures to Antfin as consideration for the purchase, with no cash payment involved, the company said in an exchange filing. Resilient will also not provide any pledge or guarantee of any kind, directly or indirectly, to Antfin as a result of the transaction. As a result, there will be no change to the management or control, and Sharma and the current board will continue in their respective roles, the company added.
The deal comes as Paytm, India’s top mobile payments platform and a contender to become a payments bank. It seeks to ease investor concerns about its future strategy and doubts about high valuations for loss-making tech firms. Since going public in 2021, the digital wallet pioneer’s shares have fallen below their initial offering price. But the company has seen signs of progress recently and is beginning to staunch losses while attracting users in new segments such as small merchants.
This investment by SoftBank will be one of the largest by a single investor in an Indian start-up. It will likely give the company a boost as it strives to return to growth, especially in its lucrative local market, where competition for consumers is fierce. Getting SoftBank on board will also help the company reduce its reliance on China’s Alibaba Group Holding Ltd, its largest shareholder, and pre-empt possible government concerns about a Chinese company’s significant influence in a critical sector.
Analysts say the acquisition will simplify Paytm’s ownership structure, reducing the number of shareholders and thus lowering its potential exposure to regulatory issues related to foreign investors in India. It will also lessen the influence of Chinas Ant Financial, which currently holds a 21% stake in Paytm through its subsidiary One97 Communications, and possibly speed up the company’s application for a non-banking financial services license.
The deal is the latest in a series of sell-downs by Ant and other Chinese investors trying to bring their holdings below 25% for regulatory purposes. Earlier this month, Alibaba’s Ant Financial sold its entire stake in One97 Communications through an open market sale. This may be a response to broader concerns expressed by the Indian government and the Reserve Bank of India about Chinese stakes in Indian financial technology companies, analysts said.
