SoftBank, Ant Group discuss Paytm secondary sale to reduce holding in payments firm

These shareholders and the investment banks representing them had earlier approached telecoms billionaire Sunil Mittal of Bharti Enterprises and another Indian conglomerate with an offer to buy their stakes.

But these talks didn’t make much headway and Bharti is not currently engaged in conversations on this issue, said these people on the condition of anonymity.

Paytm’s management including its founder and CEO Vijay Shekhar Sharma are seen to be opposed to a strategic investor coming on board the company.

A secondary sale to financial investors in the open market through a block deal is, however, still a possibility, two people familiar with the recent developments said.

Ant and SoftBank are likely to offload shares gradually in the market as part of their plan to exit Paytm, people in the know said.

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Jack Ma- founded Alibaba had exited the online payments major recently but Ant group (formerly Ant Financial) is still the single largest shareholder in the firm with about 25% stake. SoftBank and Elevation Capital own around 13% and 15% respectively, in the Noida-based firm. Sharma, himself holds close to 14% in the company. One97’s shareholding pattern will likely change as the company executed a share buyback worth Rs 849.83 crore at an average price of Rs 545.93 per share on February 13.

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A report by research firm Macquarie in November last year had said Paytm would be at risk after Reliance Industries announced it would spin off and list its financial services unit to have a wider play in the consumer facing business. Veteran banker and former ICICI Bank chief KV Kamath, has been named as the chairperson of Reliance Jio Financial Services.

“RIL has demonstrated its hunger for attaining scale in the past in other businesses, and in our view, can pose a significant growth and market-share risk for players like Bajaj Finance and Paytm with whom it could be competing head-on,” the Macquarie report said last year.

Bloomberg on Friday reported that Indian telecommunications tycoon Mittal was seeking a stake in Paytm by merging his financial services unit into the fintech giant’s payments bank, according to people with knowledge of the matter.

A person familiar with Bharti’s thinking however said these talks are not on “This is not in play,” he said.

When contacted by ET, a Paytm spokesperson said, “We do not comment on speculations, however, we can confirm that our focus remains on building a sustainable and profitable business for the long term and creating value for all our stakeholders. We are not involved in any such discussions,” said in an emailed statement.

A spokesperson for Bharti Enterprises said on Friday, that the company doesn’t comment on market speculation.

SoftBank, Elevation Capital, and Ant group, did not respond to ET’s emailed query till press time.

The Ant group has been one of the largest backers of Paytm since Alibaba’s investment in the firm. Its stake inched up higher than the threshold of 25% due to a recently concluded buyback at Paytm. This has also meant that Ant is looking to bring its ownership to below 25% for regulatory purposes as Paytm is a professionally managed company. Bloomberg reported this development on Saturday.

Recently, Alibaba group sold a 3.1% stake in One97 Communications through the open market and mopped Rs 1,377 crore. The Chinese firm has been offloading stakes in listed new-age technology companies in India amid a sharp erosion in the value of its investments and overall geopolitical concerns between the two countries. The Chinese multinational had offloaded a 3% stake in online food delivery aggregator Zomato earlier in November. Douglas Feagin, an Ant group nominee on Paytm board, resigned on February 3. He was a non-executive, non-independent director.

The conversations around the broader secondary share sale at One97 Communications, however, are not related to the regulatory aspect of Ant maintaining lower than 25% shareholding in Paytm, people in the know said.

SoftBank too has been liquidating its position as it has been severely hit by the turbulence in tech valuations especially in the public markets globally. After Paytm’s IPO in November 2021, SoftBank sold about 4.5% in Paytm for about $200 million.

Paytm shares have dropped over 71% since its stock market debut 15 months ago. The company in its latest earnings call said it has improved margins and finally hit operating profitability in the December quarter of financial year 2023.

The better than expected results has helped the stock gain momentum on the bourses since announcing the earnings earlier this month. On February 24, Paytm’s scrip closed at Rs 623.25 per share at the end of trade on the Bombay Stock Exchange.

During the December quarter, Paytm reported a positive EBITDA before Esop cost (earnings before interest, taxes, depreciation, amortisation and employee stock option costs) of Rs 31 crore.

In a post-earnings call with analysts, Paytm president and group CFO Madhur Deora had said this was sustainable.