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Paytm founder and Chief Executive Officer Vijay Shekhar Sharma is set to acquire a 10.3 per cent stake in the fintech firm from Antfin (Netherlands) Holding BV in a no-cash transaction that will make him the largest shareholder in the company.
Sharma will acquire the shares in Paytm through his wholly owned overseas entity Resilient Asset Management, raising his stake to 19.42 per cent. Antfin’s shareholding in Paytm, on the other hand, will come down to 13.5 per cent from 23.79 per cent at present, according to a filing to the stock exchanges on Monday.
Following the announcement, Paytm’s stock price soared as much as 11.57 per cent to touch Rs. 887.55 on the BSE -- before settling at Rs. 850.75, up 6.95 per cent from the previous close.
The 10.3 per cent stake in Paytm that Sharma will acquire has been valued at $628 million based on the closing price on August 4. This suggests that Antfin, an arm of Chinese fintech giant Ant Financial, will transfer close to 65 million shares of Paytm to Sharma’s overseas entity. However, Sharma will not be paying anything to Antfin for this transaction.
Resilient will issue optionally convertible debentures (OCDs) to Antfin to allow it to retain the economic value of the 10.3 per cent stake. “Accordingly, no cash payment will be made for this acquisition, and neither will any pledge, guarantee, or other value assurance be provided by Sharma, directly or otherwise,” the company said in the filing.
The deal is unusual because while the promoter gets the voting rights, the economic gains go to Antfin. With this, Sharma has removed the overhang of a Chinese-backer on its board, which may pave its path for a banking licence.
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Commenting on the deal, Shriram Subramanian, founder of InGovern Research, 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 Vijay Shekhar Sharma is increasing his commitment to the company. Secondly, the overhang of any offloading of at least 10.3 per cent shares in the market by Antfin, which is a financial investor, will go away.”
But there are concerns as well. “This transaction complicates the structure with respect to control over the company. Sebi needs to assess whether with his increased voting rights, the shareholding held by the family trust, and the potential exercise of stock options, there is case to classify Vijay Shekhar Sharma as a promoter,” said Hetal Dalal, president and chief operating officer, Institutional Investor Advisory Services India Limited.
While explaining the nuances of the deal, a source said: “Debt implies that a fixed borrowed amount needs to be repaid within a fixed time to the lender. Here Sharma has no fixed obligation…He will simply pass over whatever value he gets. And Paytm remains completely untouched in this deal. In summary, neither Vijay nor Paytm has assumed any debt. Moreover, this acquisition will enable Resilient to acquire ownership and voting rights of the 10.3 per cent block.”
This transaction will not change the management at Paytm, and Sharma will continue as the company’s managing director and chief executive officer. There is also no nominee of Antfin on Paytm’s board.
“I am proud of Paytm’s role as a true champion of made-in-India financial innovation, and our achievements in revolutionising mobile payments and contributing to formal financial services inclusion in the country. 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,” Sharma said.
Paytm, the only listed payments fintech in India, in its first-quarter results, announced that its revenue from operations jumped 39 per cent year-on-year (YoY) to Rs. 2,342 crore.
The company’s revenue from payments rose 31 per cent YoY to Rs. 1,414 crore, whereas its revenue from financial services recorded a 93 per cent surge to Rs. 522 crore. The company trimmed its losses to Rs. 358.4 crore in Q1FY24.
Paytm went public in November 2021 and raised Rs. 18,300 crore by issuing shares at a price of Rs. 1,955 per share.
