Airtel In Talks With Paytm To Offload Payments Bank Biz

In what could lead to a major consolidation in the Indian fintech space, Airtel Payments Bank and Paytm Payments Bank could be headed for a merger.

People familiar with the development told Bloomberg that the Sunil Mittal-led Bharti Enterprises was looking to merge its payments bank unit with the fintech player in lieu of a stock deal. Further, the telecom mogul is looking to buy Paytm shares from other shareholders.

Sources said that the talks are still in the early stages between Airtel and Paytm, and the deal may not materialise.

“We remain fully focused on our strong organic growth journey and are not involved in any such discussions,” a Paytm executive was quoted as saying. Bharti Enterprises refused to respond to Bloomberg’s request, citing market speculation.

Sources told Techcrunch that this is not the first time that Bharti Airtel has engaged in deliberation with Paytm to sell its fintech unit.

It was not immediately clear what could be the reason behind such a move. However, the deal could likely be led by considerations related to the overlap between the customers of both Airtel Payments Bank and Paytm Payments Bank. 

Besides, Airtel’s payments bank is a profitable entity and could give more heft to the financials of Paytm, which has been bogged down by mounting losses. The deal could also enable Paytm to leverage Airtel’s payments bank licence, as the fintech major is currently barred by the Reserve Bank of India (RBI) from onboarding new customers over gaps around its technology systems.

The development comes a couple of months after it was reported that Airtel Payments Bank was looking to list on the bourses in the coming future.

It was not immediately known what was the rationale behind Airtel’s move as the telecom major’s fintech arm is a profit-making entity. 

After commencing operations in January 2017, with an initial investment of $440 Mn, Airtel Payments Bank currently caters to more than 130 Mn customers and, as of December 2022, had an annualised revenue of INR 1,000 Cr.

Airtel was one of the first 11 companies that received licences to operate as payment banks. 

The space has largely been plagued by issues such as smaller margins, intense competition and a longer threshold period required by payments banks to turn profitable. Competition from new technologies like unified payments interface (UPI) has made matters even worse for these players. 

On the other hand, Paytm has been hit by adverse market conditions, which have negatively impacted its stock prices. Paytm saw the steepest decline in stock prices among large-cap Indian new-age tech companies, falling more than 60-70% since its record listing in late 2021.

It has also been marred by mounting losses and regulatory issues, which have made retail investors apprehensive of the stock.

Shares of Paytm closed 2.72% higher at INR 623.25 on the BSE on Friday (February 24).