Ant Group Mulls Offloading Stake In Paytm To Comply With Norms

SUMMARY

Deliberations are currently underway as Ant Group’s stake in Paytm rose slightly over the threshold due to the recent share buybacks

Talks are still in the preliminary stages and the deal could change based on regulatory and pricing concerns

The Chinese firm now has a 90-day window to slash its stake in Paytm, beginning February 13 when the Paytm buyback was completed

Chinese internet giant Ant Group is reportedly looking at slashing some of its stake in fintech major Paytm to comply with the guidelines of market regulator SEBI.

Sources told Bloomberg that the Chinese major is in talks to reduce its shareholding to below 25% in Paytm’s parent company One97 Communications. The deliberations have purportedly been undertaken after Ant Group’s stake in Paytm rose slightly over the threshold due to the recent share buybacks announced by the fintech major.

However, the talks are still in the preliminary stages, and the deal could change based on regulatory and pricing concerns. People familiar with the development said that Ant Group’s potential sale was for technical, and not political reasons.

As per SEBI, no single entity can own more than 25% of a ‘professionally managed company’.

At the end of December 2022, Ant held a 24.86% stake in One97 Communications, but its shareholding reportedly rose slightly over 25% after the repurchase reduced the number of shares outstanding. The Chinese firm now has a 90-day window to slash its stake in Paytm, beginning February 13 when the Paytm buyback was completed.

Paytm announced a buyback of up to $100 Mn in December last year.

This comes just a day after it was widely reported that Airtel was in talks with Paytm to merge its payments bank unit with the fintech major in a stock deal, and the telecom mogul was looking to buy Paytm shares from other stakeholders.

The news reports have come close on the heels of an Alibaba affiliate entity offloading its entire 3.31% stake in Paytm in a block deal pegged at INR 1,377.5 Cr.

While the move is largely technical, it could impact the Paytm stock which has been volatile for the past few months. While the company achieved the target of EBITDA profitability, without ESOP cost, in Q3 FY23, losses continue to mount at the fintech major. In addition, adverse market conditions have also impacted its stock prices.

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