MUMBAI - Paytm founder Vijay Shekhar Sharma will acquire a 10.3 per cent stake from China’s Ant Group, in an unusual transaction that will make him the company’s single biggest shareholder without paying any cash.
The deal reduces a large overhang on the market as investors bet that Ant, the Chinese fintech pioneer backed by billionaire Jack Ma, will eventually offload a chunk of its Paytm shares.
By taking control, Mr Sharma also addresses local concerns that a prominent company from a geopolitical rival runs one of India’s best-known technology firms. Paytm’s shares surged as much as 11 per cent on Monday, building on a 50 per cent rally in 2023.
Mr Sharma, chief executive officer of Paytm parent One97 Communications, will increase his holding in the company to 19.42 per cent while Ant’s drops to 13.5 per cent, according to a regulatory filing.
But he will not pay any cash and Ant instead gets convertible securities that will give it the option to recoup its economic stake in the future, and potentially benefit if Paytm’s value rises. The company did not specify a timeframe.
Mr Shriram Subramanian, founder of InGovern Research, a corporate governance advisory firm, said: “This acquisition could be for the optics of getting rid of the tag of being a Chinese company. However, the big positive is that Sharma is increasing his commitment to the company.”
“The overhang” of Ant selling shares “will go away”.
Geopolitics has complicated Paytm and Ant’s relationship. India has clashed with China in recent years in a dispute that hurt Chinese companies’ ability to operate in the neighbouring country. This year alone, India issued orders to block more than 200 apps and websites, largely linked to China.
Several Indian start-ups including Paytm have since come under fire domestically for ceding vast stakes to Chinese firms. Alibaba Group Holding, which owns about a third of Ant, completed the sale of its remaining stock in Paytm in recent months.
“As we announce this transfer of ownership, I would like to express my sincere gratitude to Ant for their unwavering support and partnership over the past several years,” Mr Sharma said in a statement.
He took the digital payments pioneer public in 2021, only to see the shares plummet in one of the worst performances for a major initial public offering. Shares closed on Friday at 796.6 rupees, compared with the 2,150 rupee offering price.
The SoftBank Group-backed company is beginning to staunch losses and win over users in new segments, such as smaller merchants. Revenue from operations rose 39 per cent to 23.4 billion rupees (S$380 million) in the June quarter.
Mr Rahul Jain of Dolat Capital wrote in a research note: “This also speaks volumes about Antfin belief in Paytm as they are supporting out of way with no commercial upfront.” BLOOMBERG
