In a strategic move to simplify its ownership structure and address concerns over Chinese ownership in Indian fintech companies, Paytm Chairman and Chief Executive, Vijay Shekhar Sharma, has acquired a 10.3 percent stake worth $628 million in the firm he founded. The stake was bought from Antfin (Netherlands) Holding B.V., an arm of the Chinese fintech giant Ant Financial, making Vijay Shekhar Sharma the single largest shareholder with a 19.42 percent holding.
The decision to reduce Chinese stakes in Indian fintechs came in response to concerns raised by the Indian government and the Reserve Bank of India (RBI) about Chinese involvement in the country’s financial technology sector. Analysts believe that this move will alleviate those concerns and strengthen Paytm’s position as a domestic digital payments firm.
To facilitate the transaction, Vijay Shekhar Sharma’s entity will issue convertible debentures to Antfin, removing the need for any cash payment or additional financial guarantees. Paytm has also confirmed that there will be no changes in the management or control of the company following this stake buyback.
This development comes after China’s Alibaba divested its entire stake in Paytm in February, and Softbank Group Corp progressively reduced its holding through open market deals, with its current stake now at 9.18 percent.
The market responded positively to the news, with Paytm’s share price surging by as much as 11.4 percent on Monday after the announcement. So far this year, Paytm’s shares have gained over 50 percent. However, despite this surge, the company’s shares remain 60 percent below their listing price in November 2021. Market skepticism surrounding its business model and concerns about valuations of loss-making tech firms have contributed to this trend.
Last year, the Reserve Bank of India had rejected Paytm’s payment aggregator’s license application, but the company was granted an extension until March to re-apply for the license.
This major stake buyback by Paytm’s founder is seen as a strategic move to address regulatory concerns and bolster the company’s position in the competitive Indian fintech market. With Vijay Shekhar Sharma now becoming the largest shareholder, all eyes are on Paytm as it navigates its way towards growth and regulatory compliance.