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Sharma, who is also the CEO of Paytm parent One97 Communications Ltd., will increase his stake in the Indian fintech company to 19.42%, while Ant will reduce it to 13.5%, according to the regulatory filing. Ant receives convertible securities that give him the option to repurchase his shares in the future. This means it could take its stake above 23% at a later date, which could benefit if Paytm’s share price rises, although the company has not set a deadline for the option to be exercised.
Paytm Founder to Take Control From Ant Without Paying Any Cash
Meanwhile, Paytm Founder to Take Control of the deal is undermining the stock market as investors bet that Ant, backed by Chinese fintech pioneer Jack Ma, will eventually divest its Paytm unit. On the management side, Sharma also expresses concern that a well-known Chinese company is running one of India’s leading technology companies at a time when tensions between the two countries are rising.
“This acquisition may have the optics of removing the Chinese company tag. But the big positive is that Vijay Shekhar Sharma is increasing his commitment to the company,” said Shriram Subramanian, founder of the governance consultancy InGovern Research. The “suspension” of trading in Ant shares “ends”.
Geopolitics has cast doubt on Paytm’s relationship with Ant.
India and China have clashed in recent years over a dispute that has hurt the ability of Chinese companies to operate in neighboring countries. This year alone, India has ordered the blocking of more than 200 apps and websites linked to China.
Several Indian startups, including Paytm, have come under fire domestically for offering large sums of money to Chinese companies. Alibaba Group Holding Ltd., which owns about a third of Ant, has sold its remaining stake in Paytm in recent months.
Also Read: SoftBank-backed Paytm makes fewer losses with user wins
“As we announce the transfer of ownership, I would like to express my sincere gratitude to Ant for his unwavering support and cooperation over the years,” Sharma said in a statement.
Sharma took the digital payments fund public in 2021, only to see huge margins in one of the worst performances in a big initial public offering. The stock closed at 796.6 rupees ($9.63) on Friday, compared with 2,150 rupees
SoftBank.
Companies backed by SoftBank Group Corp. are starting to cut back. of losses and hire in new segments such as retail. Revenue from operations rose 39% to 23.4 billion rupees in the June quarter.
Paytm’s billionaire founder emerged unscathed in a crucial test of investor confidence, with a large majority of shareholders voting to keep him at the helm of the fintech pioneer, which debuted in one of the worst markets in Indian history.
An emphatic 99.67 percent of shareholders voted for Vijay Shekhar Sharma as managing director and chief executive among the issues decided at the company’s annual general meeting. A proxy advisory firm last week recommended that shareholders replace the founder as managing director and chief executive, citing concerns about his ability to reverse the payments provider’s losses.
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Sharma who was the Paytm Founder to Take Control “received a resounding vote of confidence from shareholders in his re-appointment as managing director and CEO,” the company said in its exchange filing and press statement on Sunday. Each of the seven resolutions, including one detailing Sharma’s salary, passed with at least 94 percent in favor.
Paytm, India’s poster boy for tech startups, has lost more than 60 percent of its value since a high-profile initial public offering in November as it tries to convince investors of its buyout potential. Sharma, 44, said in an interview last month that Paytm would become India’s first internet company to reach $1 billion in annual revenue and pledged to shift from growth to profit.
Institutional Investor Advisory Services India Ltd. said last week that investors should vote against Sharma’s reappointment and that the board should bring in a specialist in the role. Before the IPO, Sharma spoke publicly several times about the company becoming profitable, but this did not materialize even at the operational level, the company said.
Paytm, listed as One 97 Communications Ltd., is considered by Ant Group Co., Antfin (Netherlands) Holding BV., SoftBank Group Corp., and major shareholders of the Canada Pension Plan Investment Board. Of the dozen analysts covering the company, six have a buy rating, three have a hold rating, and the remaining three recommend that investors sell their shares.
Sharma’s remuneration
Sharma’s remuneration has been fixed for the next three years without annual increments, the company said on Sunday.
The founder previously said that the incentive for employee shares will be granted if the company’s market value permanently exceeds the IPO level.
Shareholders approved the reappointment of Ravi Adusumalli to the board, which was not recommended by the proxy advisor, and the appointment of Madhur Deora as a whole-time director and group finance director.
Tangguh Asset Management, a company wholly owned by Sharma, will take over the stake from Ant Financial, Paytm said. The deal will execute at Paytm’s closing share price on August 4, making Paytm’s 10.3% stake worth $628 million.
The move will allow Paytm to reduce its exposure to Ant Financial
The move will allow Paytm to reduce its exposure to Ant Financial, making the Indian company a better fit for future licensing in the country. Paytm’s move “eliminated the share overhang from the risk that Antfin could reduce its holdings in the future, leading to increased supply. In addition, Sharma’s purchase of shares at the close Friday shows he is confident in the story with a ‘skin in the game’s approach,” wrote Bank of America analysts on Monday.
“This development also reduces the risk of entry by other strategic investors with large stakes like Sharma. We believe that the Chinese shareholder (Antfin) will cease to be the largest shareholder, which is also a positive direction for the company’s fundamentals.”
Neither Sharma nor Resilient will pay cash for the deal, which will be executed off-market. In addition, Sharma does not directly or indirectly make any promises, warranties, or other guarantees of value to Ant Financial, Paytm said.
Paytm jumped more than 6.5% on the news.
Following the deal, Sharma’s stake in Paytm will rise to 19.42%, while Ant Financial’s stake will decrease to 13.5%, Paytm said. The move follows a turnaround at Paytm, which has an uncertain listing but has significantly boosted its finances in recent quarters.
Sharma’s Resilient will issue an optional convertible bond to Ant Financial, allowing the Chinese giant “to maintain the economic value of a 10.30% stake,”
“I am proud of Paytm’s role as a true champion of financial innovation in India and our achievements in revolutionizing mobile payments and contributing to the formal inclusion of financial services in the country. As we announce the transfer of ownership, I would like to express my sincere gratitude to Ant for its unwavering support and partnership over the past few years,” Sharma said in a prepared statement.
Bengaluru, Aug. 7 (Reuters) – Paytm (PAYT.NS) chairman Vijay Shekhar Sharma is buying a 10.3 percent stake in the company he co-founded for $628 million from Chinese fintech giant Ant Financial in a deal that would make it the single largest shareholder.
Analysts say, Sharma, who is also Paytm’s chief executive, is looking to simplify its ownership structure amid broader concerns about Chinese ownership of the Indian financial technology firm.
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Sharma Paytm Founder to Take Control will now be the largest shareholder in the digital payments company with a 19.42% stake.
Sharma bought shares from Antfin (Netherlands) Holding B.V. based on Paytm’s last closing price, which is worth $628 million and reduces the Chinese company’s stake in the company to 13.5%.
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Sharma’s unit will issue convertible bonds to Antfin instead of paying cash for the shares.
“Therefore, no cash will pay for this acquisition, and no pledge, guarantee, or another guarantee of value is made by Mr. Sharma either directly or otherwise,” Paytm say in a statement on Monday.
According to the company, there will be no change in the governance or management of Paytm.
The Antfin sale comes after China’s Alibaba ( 9988. HK ) sold its entire stake in Paytm in February. Japan’s Softbank Group Corp. ( 9984.T ) also reduced its stake in Paytm in an open market deal, keeping it at 9.18% after the latest deal.
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Shares of Paytm rose 11.4% on Monday following the announcement and have gained more than 50% so far this year.
Despite the share price surge, the company’s stock was still 60% below its November 2021 stock price at the last close, amid doubts about its business model and broader concerns over high valuations of loss-making tech companies.
Last November, the Reserve Bank of India rejected Paytm’s application for a payment aggregator license, but in March, it granted the company an extension to reapply for the license.
Varun Vyas reported in Bengaluru; Edited by Dhanya Ann Thoppil, Eileen Soreng, Lincoln Feast, and Sonali Paul
