Paytm's CEO becomes the company's largest stakeholder after repurchasing an Antfin stake worth USD 628 million.
Sharma to become Paytm's largest shareholder with 19.42 per cent stake, Antfin's ownership down to 13.5 per cent.
Paytm Chairman Vijay Shekhar Sharma is purchasing a 10.3 per cent stake for USD 628 million in the company he created from an affiliate of Chinese fintech giant Ant Financial in an effort to streamline its ownership structure and allay worries about Chinese involvement in Indian financial technology businesses.
The deal will make Sharma the single largest shareholder in Paytm, with a holding of 19.42 per cent. Antfin's ownership in the firm will be reduced to 13.5 per cent.
An entity belonging to Sharma will issue convertible debentures to Antfin instead of paying cash for the stake. This means that Sharma will not have to make any upfront payment, but will instead pay for the stake over time through a series of interest payments. The deal is subject to regulatory approvals.
The move comes as the Indian government has been scrutinizing Chinese investment in the country's technology sector. In November, the Reserve Bank of India rejected Paytm's application for a payment aggregator's license, citing concerns about the company's ownership structure.
Paytm's shares rose as much as 11.4 per cent on Monday after the announcement of the stake sale. However, the company's shares are still 60 per cent below their listing price in November 2021, amid doubts about its business model and wider concerns about lofty valuations on loss-making tech firms.
The deal is a significant vote of confidence in Paytm by Sharma, who has been under pressure from investors and regulators in recent months. It also shows that the company is still attractive to investors, despite its recent struggles.
The deal is also a sign that Sharma is determined to take control of Paytm and simplify its ownership structure. This could make it easier for the company to raise capital in the future and could also help to improve its regulatory standing.
Overall, the deal is a positive development for Paytm and could help the company to overcome its recent challenges.
Disclaimer: The article is for informational purposes only and not investment advice.