An overseas entity owned by Vijay Shekhar Sharma will acquire a 10.3 percent stake in Paytm from Antfin through an off-market transfer. This move will increase Sharma’s shareholding in Paytm to 19.42 percent, while Antfin’s shareholding will reduce to 13.5 percent.
Agreement Between Vijay Shekhar Sharma and Antfin
Founder and CEO of One 97 Communications Limited, Vijay Shekhar Sharma, and Antfin have entered into an agreement. As per this agreement, Sharma’s overseas entity, Resilient Asset Management B.V, will acquire a 10.3 percent stake in Paytm through an off-market transfer.
Largest Shareholder Status
Upon completion of the transaction, Vijay Shekhar Sharma and the promoter entities will become the largest shareholders in Paytm.
Impact on Paytm’s Shares
The announcement led to a surge of over 10 percent in Paytm’s shares from the previous close. The stock was trading at Rs 851 on the National Stock Exchange at 10 am.
“This unique ownership arrangement between Sharma and Ant Financial ensures greater control and protection against hostile bids. Vijay Shekhar Sharma’s partnership with Elevation Capital further solidifies their ownership, giving them a combined ownership of over 30 percent,” a source close to the development revealed.
Regulatory Implications
Vijay Shekhar Sharma has engaged with RBI and market regulator Sebi to discuss this move. However, its impact on regulatory comfort is yet to be seen. Paytm has consistently denied any regulator or government pressure to reduce Chinese influence in the company.
Dynamics of the Deal
According to the executed agreement, Resilient will acquire ownership and voting rights of the 10.30 percent stake. In exchange, Resilient will issue Optionally Convertible Debentures (OCDs) to Antfin, allowing Antfin to retain the economic value of the stake.
The value of the 10.3 percent stake is approximately $628 million, based on the closing price as of August 4.
Vijay Shekhar Sharma’s Statement
“I am proud of Paytm’s role as a champion of made-in-India financial innovation. As we announce this transfer of ownership, I express my gratitude to Ant for their unwavering support over the years,” Sharma said.
Chinese Shareholding Concerns
Following tensions between the Indian and Chinese armies, the Indian government has restricted Chinese investments and banned several Chinese apps. Concerns over large Chinese shareholding led to pending approvals for Paytm.
“Paytm Payments Services Limited (PPSL) continues to seek government approval for investments as per FDI Guidelines. RBI’s letter dated Mar’23 allows PPSL to continue its online payment aggregation business while awaiting approval from the government,” the company disclosed during the June quarter results.
Paytm’s Performance
Paytm reported a 39.4 percent growth in Q1 revenue at Rs 2,341 crore, narrowing losses by 45 percent to Rs 358 crore compared to the previous year. The payments business revenue increased by 31 percent, and the net payment margin rose by 69 percent year-on-year to Rs 648 crore.
Revenue from financial services, including the lending marketplace platform, increased by 93 percent year-on-year to Rs 522 crore. The company’s cash balance stood at Rs 8,367 crore during the quarter ending June 2023.
