In a transformative shift in India’s fintech landscape, Vijay Shekhar Sharma, the visionary founder, and CEO of One97 Communications, is set to solidify his influence as a driving force behind Paytm.
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Having steered the company’s evolution since its inception in August 2010, Sharma is poised to bolster his ownership stake to an impressive 19.3%. This strategic maneuver comes through a noteworthy off-market transfer, where Sharma will acquire a substantial 10.30% stake in Paytm from Antfin (Netherlands) Holding BV, cementing the transition of the famed Paytm brand from being predominantly controlled by Chinese entities to now standing as a prominent emblem of Indian ownership. It’s worth noting that while Sharma assumes this new ownership, Antfin will maintain its economic rights over the transferred stake, underscoring the intricacies of this landmark deal.
Source: The Financial Express
Under the terms of the agreement, Vijay Shekhar Sharma is poised to acquire a significant 10.3% stake in Paytm from Antfin. This acquisition will be orchestrated through his fully owned overseas entity, Resilient Asset Management BV, effectively propelling him into the role of the company’s most prominent shareholder, boasting an impressive total stake of 19.42%. Notably, before this transaction, Sharma held a modest stake of slightly over 9% in Paytm. In a reciprocal arrangement, Resilient Asset will issue OCDs (optionally convertible debentures) to Antfin as part of the deal structure.
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,” a BSE filing said. With this deal, the shareholding of Antfin will decline to 13.5 percent in Paytm from the 23.8 percent it held earlier. Under this transaction, there would be no change in the management or control of Paytm, since Sharma would continue as Managing Director and CEO, and the existing board would continue as it is.
Source: Business Wire
Furthermore, it’s important to note that there is no representative from Antfin serving on Paytm’s board, given its affiliation with China’s Ant Group Co. In light of this ownership transition, Vijay Shekhar Sharma conveyed his heartfelt appreciation to Ant for their steadfast collaboration and support throughout the preceding years. During the Paytm listing, Antfin held a stake of 29.6%, necessitating a reduction below the 25% threshold to align with regulatory mandates.
In January and February, the Alibaba Group fully divested its 6.26% direct stake in the company, while its affiliated entity, Antfin, retained its position as the predominant shareholder, holding a substantial stake of nearly 25%. The Antfin transaction was executed at an approximate rate of ₹795 per share, marking a significant contrast to the Paytm IPO listing price of ₹2,150 per share. This development is a notable boon for Paytm, as it underscores the amplified commitment of its founder, Vijay Shekhar Sharma, to the company. Moreover, the apprehension surrounding a potential 10.3% share offloading by Antfin, previously perceived as a Chinese financial investor, is effectively dispelled, as highlighted by Shriram Subramanian, Managing Director of InGovern.
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The revised structure additionally ensures compliance with the Substantial Acquisition of Shares and Takeovers (SAST) threshold, maintaining ownership below the 25% mark that signifies a shift in the company’s control.
A report from BofA Securities, authored by research analysts Sachin Salgaonkar and Anand Swaminathan, highlights the potential positive impact on the company’s fundamentals resulting from the Chinese shareholder (Antfin) relinquishing its position as the primary stakeholder.
Source: Logowik
BofA’s analysis further notes that the Reserve Bank of India (RBI) had declined Paytm Payments Services Limited’s (PPSL) application to function as a payment aggregator, providing a 120-day window for reapplication in November. During this interim, the wholly owned subsidiary of Paytm, PPSL, was instructed to abstain from enlisting new online merchants, a measure attributed to aligning with foreign direct investment (FDI) guidelines. However, the report anticipates these concerns to diminish in the future.
