One97 Communications Ltd, the parent company for Paytm and many of its verticals, is set to infuse INR 743 Cr funding into founder Vijay Shekhar Sharma’s investment companies VSS Holdings and VSS InvestCo. Sharma is a director in the companies along with wife Mridula Parashar and they were incorporated in January 2020, as per regulatory filings.
The infusion into Sharma’s investment companies comes ahead of the massive $3 Bn Paytm IPO planned later this year. Paytm’s board will discuss and approve or reject the proposal later this month. One97 has proposed to purchase INR 491.93 Cr worth of optionally convertible debentures from VSS Holdings Pvt. Ltd, and it has also proposed a loan of INR 250.79 Cr to VSS Investco through inter-corporate deposits.
Paytm’s debentures in VSS Holdings will mature in 10 years and bear an annual interest of 15%. Paytm will finish with 96% stake in VSS Holdings when the debentures are converted into shares, and the exercise time is up to Paytm.
VSS Investco will have to repay the loan within 12 months or before Paytm’s IPO. It will raise the amount through external funding or founder Sharma will sell his shares in VSS Investco to repay the loan.
Both companies will utilise the funds for their primary business activities, which according to filings is to “invest in and acquire or hold securities, shares or debentures in one or more companies and to sell, purchase or otherwise deal in shares, stocks, bonds”. Essentially, these are the companies that manage Paytm founder Sharma’s personal investments.
So far, the Paytm founder has invested in companies such as Kawa Space, Unacademy, Innov8, which was acquired by OYO, Milaap, Nurturing Green and other startups. He has also backed Noida-based startup incubator GoMassive Earth Network’s early-stage investment syndication platform focussing on solutions that fight climate change, as well as Roots Ventures as anchor limited partner.
Last week, the company announced that its overall revenue took a hit amid the pandemic, falling 9.9% from INR 3,540.77 in FY20 to INR 3,186.8 in FY21 on a consolidated basis. But the fintech giant’s losses also narrowed 42% to INR 1,704.01 Cr from INR 2,943.32 Cr in the same period.
The company achieved this on the back of lowering its expenses from INR 6,138.23 Cr in FY20 to INR 4,782.95 Cr in FY21, the company’s annual report showed. While Paytm spent a staggering INR 1,397.05 Cr in marketing in the financial year ending March 2020, the digital payments company tamped down its marketing spend by 62% to INR 532.32 Cr amid the pandemic as digital adoption went up.
“We used to spend $20-25 Mn a month on cashbacks before, but now we spend $1 Mn but are still gaining the market share,” Paytm founder and CEO Sharma had said in March this year.