Paytm CEO to buy 10% stake from China’s Antfin
Paytm Chairman Vijay Shekhar Sharma is set to purchase a 10.3% stake worth $628 million in the company he founded. This stake is being acquired from a subsidiary of Chinese fintech giant Ant Financial. The transaction will make Sharma the single largest shareholder in Paytm.
The decision to buy this stake comes as Sharma aims to simplify the ownership structure of Paytm, responding to broader concerns regarding Chinese ownership in Indian financial technology companies. By acquiring the additional stake, Sharma’s holding in the digital payments firm will increase to 19.42%, making him the largest shareholder.
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This move represents a significant step for Paytm and Vijay Shekhar Sharma, consolidating his control over the company he co-founded and leading its operations as the Chief Executive Officer. The transaction could also have implications for the ownership dynamics and strategic direction of Paytm in the Indian fintech landscape.
It’s important to note that the situation is subject to regulatory approvals and further developments. For the latest updates on the transaction and its implications, it is recommended to refer to reliable news sources and official announcements from Paytm.
Both the Indian government and the Reserve Bank of India (RBI) expressed concerns about Chinese stakes in Indian fintech companies, prompting efforts to reduce Chinese ownership in Paytm. A Mumbai-based analyst from a domestic brokerage disclosed that the motive behind the stake acquisition by Paytm Chairman Vijay Shekhar Sharma was to decrease Chinese companies’ influence in the company. However, the analyst preferred to remain anonymous as they are not authorized to speak to the media.
In the deal, Sharma will purchase a 10.3% stake from Antfin (Netherlands) Holding B.V., the subsidiary of Chinese fintech giant Ant Financial. This acquisition, based on Paytm’s last closing price, is valued at $628 million and will lead to a reduction of Ant Financial’s ownership in Paytm to 13.5%.
Interestingly, instead of a cash payment for the stake, an entity associated with Vijay Shekhar Sharma will issue convertible debentures to Ant Financial. This move implies a strategic approach in structuring the deal.
The transaction aligns with the authorities’ efforts to address concerns surrounding Chinese involvement in Indian fintech companies and simplifies Paytm’s ownership structure. By reducing Chinese ownership in Paytm, the company seeks to address regulatory concerns while retaining its position as a prominent player in the Indian digital payments industry.
Paytm released a statement on Monday clarifying that no cash payment would be involved in the acquisition of the 10.3% stake by Chairman Vijay Shekhar Sharma. Additionally, the statement highlighted that Mr. Sharma would not provide any pledge, guarantee, or other value assurance, either directly or indirectly, for the transaction.
The acquisition would not result in any changes to the management or control of Paytm, ensuring continuity in the company’s leadership and operations.
Antfin’s decision to sell its stake comes after Alibaba, another Chinese company, sold its entire stake in Paytm back in February. Furthermore, Japan’s Softbank Group Corp has been reducing its stake in Paytm through open market deals, with its holding currently standing at 9.18% after its most recent transaction.
The selldown of stakes by Chinese and other investors may be related to concerns raised by the Indian government and the Reserve Bank of India about Chinese ownership in Indian fintech companies. These transactions are likely aimed at reducing Chinese influence in Paytm and addressing regulatory considerations.
As the situation unfolds, it is essential to refer to official statements and reliable news sources for further updates on Paytm’s ownership structure and the implications of these stake transactions for the company and the Indian fintech sector.
Following the announcement of Vijay Shekhar Sharma’s acquisition of a 10.3% stake in Paytm, the company’s shares surged by as much as 11.4% on Monday. Year-to-date, the shares have gained over 50%. However, it is worth noting that despite the recent increase, as of the last close, the company’s shares still remained 60% below their listing price in November 2021.
Investor concerns regarding Paytm’s business model and broader doubts about high valuations of loss-making tech firms have contributed to the subdued performance of the company’s shares since its listing.
In November 2021, the Reserve Bank of India (RBI) rejected Paytm’s payment aggregator’s licence application. Nonetheless, in March, the RBI granted the company an extension to re-apply for the license, providing Paytm with an opportunity to address the regulatory requirements and seek the license at a later date.
Despite the recent share price jump, Paytm continues to face challenges in regaining market confidence and addressing regulatory concerns. The acquisition of the stake by Vijay Shekhar Sharma might be seen as a strategic move to address Chinese ownership concerns and simplify the company’s ownership structure, but the path to recovery remains uncertain, given the ongoing market dynamics and regulatory environment.
As the situation unfolds, market observers and investors will closely monitor Paytm’s developments and official announcements to assess its trajectory in the Indian fintech landscape. It is recommended to rely on reliable news sources and official statements for the latest updates and insights into Paytm’s future prospects.
