Vijay Shekhar Sharma to buy 10.3% stake in Paytm from Antfin in no-cash deal

Fintech firm One97 Communications founder and CEO Vijay Shekhar Sharma will acquire a 10.30 per cent stake in Paytm from Antfin (Netherlands) Holding BV through an off-market transfer in a no-cash deal.

The deal turns One97 Communications, which operates under Paytm brand name, into a majorly Indian-owned company from being majorly owned by Chinese entities.

Antfin will continue to hold the economic rights of the stake that is being transferred to Sharma.

As per the deal, Sharma will purchase 10.3 per cent shareholding in Paytm from Antfin through his 100 per cent owned overseas entity Resilient Asset Management BV which will make him the largest shareholder in the company with a total stake of 19.42 per cent.

Sharma held a little over 9 per cent stake in Paytm before the deal.

Resilient Asset in return will issue debt instrument OCDs (optionally convertible debentures) to Antfin.

"Accordingly, no cash payment will be made for this acquisition, and neither will any pledge, guarantee, or other value assurance be provided by Sharma, directly or otherwise," a BSE filing said.

With this deal, shareholding of Antfin will decline to 13.5 per cent in Paytm from 23.8 per cent it held earlier.

Pursuant to this transaction, there would be no change in the management or control of Paytm, since Sharma would continue as Managing Director and CEO, and the existing board would continue as it is.

Further, there is no nominee of Antfin on the board of Paytm. Antfin is an affiliate of China's Ant Group Co.

"As we announce this transfer of ownership, I would like to express my sincere gratitude to Ant for their unwavering support and partnership over the past several years," Sharma said

At the time of Paytm listing, Antfin held 29.6 per cent stake in the company and it was required to bring down stake below 25 per cent to meet regulatory compliance.

Alibaba Group had in January and February sold its entire 6.26 per cent that it directly held in the company while group firm Antfin continued to be the biggest shareholder in the company with close to around 25 per cent stake.

The Antfin transaction took place at a price of around Rs 795 per share which is around one-third of Paytm IPO listing price of Rs 2,150 apiece.

"This is a big positive for Paytm as Vijay Shekhar Sharma, as founder, is significantly increasing his commitment to the company. Secondly, the overhang of any offloading of at least 10.3 per cent shares in the market by Antfin, which was seen as a Chinese financial investor, will go away," InGovern Managing Director Shriram Subramanian said.

He said that the new structure also ensures it is below the 25 per cent SAST (Substantial Acquisition of Shares and Takeovers) threshold for change of control of the company.

"We believe a Chinese shareholder (Antfin) ceasing to be the largest shareholder would also directionally be positive for the company fundamentals," BofA securities report by research analysts Sachin Salgaonkar and Anand Swaminathan said.

BofA said that Reserve Bank of India (RBI) declined Paytm Payments Services Limited's (PPSL) application to operate as a payment aggregator and it gave it 120 days to reapply for the licence in November.

"Until it gets an approval, the company, which is a wholly owned subsidiary of Paytm, has been asked to not onboard new online merchants. As per media, this was to give PPSL time to comply with foreign direct investment (FDI) guidelines. We now don't expect such concerns going ahead," the report said.