Sebi examines IPO-bound Paytm's shareholders Ant Group, Alibaba for compliance issues: Report

Market regulator Securities and Exchange Board of India (Sebi) is examining if Paytm shareholders Ant Group and Alibaba are in compliance with listing regulations.

The move comes ahead of Paytm’s Rs 16,000-crore initial public listing (IPO).

The regulator is reportedly looking at whether the two investors must be treated as separate companies or a combined entity, which is a part of its due diligence process, according to a report by the Business Standard.

With around 30 per cent stake in Paytm, Ant Group is its single largest shareholder. Ant is an affiliate of the Alibaba Group and they are registered as separate companies. Cummulatively, they both hold 37 per cent stake in Paytm.

Also Read — Paytm to add Ant’s Feagin to board, ramp up stock awards

According to the report, to become a professionally managed company, no single entity can own more than 25 per cent in Paytm.

“Sebi (Issue of Capital and Disclosure Requirements) rules provide for companies without promoter, also called professionally managed company, where they do not need to designate a promoter. But each issuance has different dynamics. So in this case, Alibaba and Ant group, both are being looked at for compliance issues,” a regulatory source told the publication.

Also Read — Paytm eyes Rs 16,600-crore IPO by October-end, hopes to break even in 18 months

If the market regulator views the two as a combined entity, it may impose some caveats and give a definite time frame to Ant Group and Alibaba to offload their stake to 25 per cent from the current 37 per cent, according to the report.

Paytm has reportedly said that Ant Group would shed its stake by 5 per cent as part of the IPO to comply with Sebi’s PMC norms.

The digital payments firm expects to launch its IPO at around the end of October, pending regulatory approvals.

Paytm, which has filed for a Rs 16,600 crore ($2.2 billion) IPO that will likely be the largest ever in India, also expects to break even in 18 months.

Paytm's IPO plan comes at a time when several first-generation homegrown startups in India are preparing to go public on domestic bourses, led by food delivery firm Zomato which made a stellar stock market debut.

With agency inputs.