 "Paytm set to sell stake in Japan's PayPay to SoftBank for $250 million")
One97 Communications, the parent company of Paytm, is close to finalising a $250 million (approximately Rs 2,000 crore) deal to sell its stake in Japan’s digital payments company, PayPay Corporation, to SoftBank Group, according to a Moneycontrol report.
The sale is part of Paytm’s broader strategy to offload non-core assets and strengthen its capital base, enabling a sharper focus on its core payments business after a challenging year. Earlier in 2024, the company sold its entertainment ticketing business, Paytm Insider, to Zomato for Rs 2,048 crore.
Paytm-PayPay partnership
Paytm’s involvement with PayPay dates back to 2018, when the company teamed up with PayPay Corporation — a joint venture between SoftBank, its major shareholder at the time, and Yahoo Japan (Z Holdings) — to launch QR-code-based cashless payments in the region.
A release from July 27, 2018, stated, “PayPay Corporation, SoftBank, Yahoo Japan, and Paytm will expand the number of users by including the customer base of SoftBank and ‘Yahoo! Wallet’, which comprises approximately 40 million accounts. They will also deploy the platform using SoftBank’s sales know-how and develop a tailored service offering leveraging Paytm’s technology.”
At the time, Paytm served as a technology partner for PayPay and held a call option on PayPay equity, giving it an estimated 5.4 per cent stake. SoftBank, a significant shareholder in Paytm through its Vision Fund, gradually reduced its stake and fully exited the company by June 2024, the report said.
Paytm’s return to growth
The sale of stakes in Insider and PayPay is part of Paytm’s strategy to re-establish its position in the fintech sector after facing regulatory challenges with its banking arm, Paytm Payments Bank, earlier this year.
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In October, Paytm received approval from the National Payments Corporation of India (NPCI) to onboard new UPI users, lifting the previous restrictions entirely.
The company has been undergoing restructuring efforts, including reducing employee costs, shedding non-core assets like travel and ticketing services, and streamlining its lending business by focusing on more secure offerings and adopting a distribution-only credit model.
Paytm’s financial performance
One97 Communications reported a profit of Rs 930 crore in the September quarter, a sharp improvement from Rs 290-crore loss during the same period last year, largely due to the sale of Paytm Insider to Zomato.
The company’s revenue from operations increased by 10.5 per cent, rising to Rs 1,659 crore from Rs 1,501 crore in Q1, though it still dropped 34 per cent year-on-year.
Speaking on Paytm’s future in an exchange filing on Q2 results, founder and CEO Vijay Shekhar Sharma said, “There are large opportunities for Paytm to grow. We are not here to become a mediocre player. Paytm will have a significant role to play in the UPI consumer market. Once we have customers on the platform, we will have extraordinary opportunities to cross-sell financial services and other by-products.”
During the earnings call, Sharma expressed confidence in addressing concentration risks within the UPI ecosystem. “In the UPI ecosystem, when the RBI allowed us to become a TPAP (Third Party Application Provider) player, it very clearly marked a responsibility to Paytm to potentially solve the concentration risks the system carries,” he added, as mentioned by the report.