Paytm Founder to Take Control From Ant Without Paying Any Cash

(Bloomberg) — Paytm founder Vijay Shekhar Sharma will acquire a 10.3% stake from China’s Ant Group Co., in an unusual transaction that will make the entrepreneur the company’s single biggest shareholder without paying any cash.

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The deal reduces a large overhang on the market as investors bet Ant, the Chinese fintech pioneer backed by billionaire Jack Ma, will eventually offload a chunk of its Paytm shares. By taking control, Sharma also addresses local concerns that a prominent company from a geopolitical rival runs one of India’s best-known tech firms. Paytm’s shares surged as much as 11% Monday, building on a 50% rally in 2023.

Sharma, chief executive officer of Paytm-parent One97 Communications Ltd., will increase his holding in the company to 19.42% while Ant’s drops to 13.5%, according to a regulatory filing. But the CEO won’t pay any cash and Ant instead gets convertible securities that will give it the option to recoup its economic stake in future, and potentially benefit if Paytm’s value rises. The company didn’t specify a timeframe and representatives declined to elaborate.

“This acquisition could be for the optics of getting rid of the tag of being a Chinese company. However, the big positive is that Vijay Shekhar Sharma is increasing his commitment to the company,” said Shriram Subramanian, founder of InGovern Research, a corporate governance advisory firm. “The overhang” of Ant selling shares “will go away.”

Geopolitics has complicated Paytm and Ant’s relationship. India has clashed with China in recent years in a dispute that hurt Chinese companies’ ability to operate in the neighboring country. This year alone, India issued orders to block more than 200 apps and websites, largely linked to China.

Several Indian startups including Paytm have since come under fire domestically for ceding vast stakes to Chinese firms. Alibaba Group Holding Ltd., which owns about a third of Ant, completed the sale of its remaining stock in Paytm in recent months.

“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 in the statement.

Sharma took the digital payments pioneer public in 2021 only to see the shares plummet in one of the worst performances for a major initial public offering. Shares closed Friday at 796.6 rupees, compared with the 2,150 rupee offering price.

The SoftBank Group Corp.-backed company is beginning to staunch losses and win users in new segments such as smaller merchants. Revenue from operations rose 39% to 23.4 billion rupees in the June quarter.

“This also speaks volumes about Antfin belief in Paytm as they are supporting out of way with no commercial upfront,” Rahul Jain of Dolat Capital wrote in a research note.

–With assistance from Chiranjivi Chakraborty.

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