Paytm is about to see a major shake-up in its ownership structure. Reports indicate that SoftBank and Ant Group, two major stakeholders in the company, are planning to sell their stakes in Paytm.
What does this mean for the company?
Let’s find out!
The Story So Far
It was in 2015 that Ant invested about $680 million in One97 Communications. SoftBank’s Masayoshi Son followed in 2017, and invested $1.4 billion in the company.
Currently, SoftBank owns a 13% stake in Paytm, and Ant holds a 25% stake.
According to reports, the two companies are in discussions with several parties, including Airtel’s Sunil Mittal, about the potential sale of their stakes.
Why the Sale?
The reasons are not clear. But we can speculate about a couple of factors, primarily regulatory and financial concerns.
The Indian government, for instance, is doubling down on its scrutiny of foreign investment in the fintech sector. SoftBank and Ant may be looking to divest their stakes to avoid any regulatory hurdles in the future. The worsening diplomatic relations between India and China are not helping things.
Apart from that, both SoftBank and Ant have been facing financial pressures. SoftBank has had a couple of failed investments like WeWork. Ant’s IPO was canceled at the last minute. Conditions are dire, to say the least, and both of these companies are rooting for a win. Add to that the strains imposed by COVID-19, and we have quite a situation on our hands!
What does this mean for Paytm?
If SoftBank and Ant sell their stakes in Paytm, it will likely have significant implications for the company.
Firstly, because these are bulk offloads, they will need to find other investors who are willing to buy the bulk. Secondly, there are concerns about a new investor coming on the board of Paytm. According to a report by Economic Times, CEO Vijay Shekhar Sharma is opposed to a new strategic investor joining the Board.
As of now, there are no clear indications as to whether the sale will actually take place. Even if Ant and SoftBank are not able to complete a bulk offload, they will gradually withdraw their investment over the next couple of years.
The sale could have significant implications for Paytm’s future, as the company looks to continue its growth trajectory and fend off competition in India’s rapidly evolving mobile payments landscape.