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 in a deal that would make him its single largest shareholder.
The move comes as Sharma, who is also Paytm's chief executive, looks to simplify its ownership structure amid broader concerns about Chinese ownership in Indian financial technology companies, analysts said.
Sharma will now be the largest shareholder in the digital payments firm with a holding of 19.42%.
"The government and RBI both were concerned about Chinese stakes in Indian fintechs, so the point was to reduce the stake of the Chinese companies in Paytm," said a Mumbai-based analyst with a domestic brokerage. They did not want to be named as they are not authorised to talk to media.
The stake that Sharma is buying from Antfin (Netherlands) Holding B.V. is valued at $628 million based on Paytm's last closing price and will reduce the Chinese firm's ownership in the firm to 13.5%.
An entity belonging to Sharma will issue convertible debentures to Antfin instead of paying cash for the stake.
"No cash payment will be made for this acquisition, and neither will any pledge, guarantee, or other value assurance be provided by Mr Sharma, directly or otherwise," Paytm said in a statement on Monday (7th Aug 2023).
The company said there would be no change in the management or control of Paytm.
Antfin's selldown comes after China's Alibaba sold its entire stake in Paytm in February. Japan's Softbank Group Corp has also been cutting its stake in Paytm through open market deals, with its holding down to 9.18% after its latest deal.
Shares of Paytm rose as much as 11.4% on Monday (7th Aug 2023) after the announcement and have gained more than 50% so far this year.
Despite the share price jump, as of the last close the company's shares were still 60% below their listing price in November 2021, amid doubts about its business model and wider concerns about lofty valuations on loss-making tech firms.
Last November, the Reserve Bank of India rejected Paytm's payment aggregator's licence application, but it gave the company an extension in March to re-apply for the license.
