The government panel overseeing investments linked to China has cleared the INR 50 Cr investment by Paytm in its subsidiary
The approval is yet to be vetted by finance minister Nirmala Sitharaman
Post the investment, Paytm will be able to apply for online payment aggregator licence from the Reserve Bank of India
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Fintech major Paytm has moved one step closer to getting the government’s approval for its INR 50 Cr investment in Paytm Payment Services, with a government panel clearing the proposed investment.
The approval is yet to be vetted by finance minister Nirmala Sitharaman, Reuters reported, citing sources. Once the FM greenlights the investment, Paytm will be able to apply for an online payment aggregator (PA) licence from the Reserve Bank of India.
It is pertinent to note that the government panel, which has representatives from the ministries of home, finance and industries, clears investment proposals pertaining to neighbouring countries. The panel also seeks inputs from the foreign ministry.
Earlier this year, it was reported that while the home ministry cleared Paytm’s investment in Paytm Payment Services, the foreign ministry rejected the proposal.
As per reports, the government’s concerns were due to China-based Antfin (Netherlands) Holdings’ shareholding in Paytm. As of the quarter ended March 2024, Antfin (Netherlands) Holdings’ held a 9.88% stake in Paytm.
Inc42 has reached out to Paytm seeking comments on the latest development. Meanwhile, a company spokesperson told Reuters that Paytm does not comment on market speculation.
Paytm Payment Services was set up by Paytm to get a PA licence. The company first tried to secure the PA licence in 2020. However, the RBI directed it to resubmit the application to ensure compliance with the FDI rules.
The PA framework was introduced by the RBI in March 2020. It mandates that payment gateways secure an aggregator licence for acquiring merchants and delivering digital payment acceptance solutions.
Paytm incorporated Paytm Payment Services to transfer its online payments business and invest capital in the subsidiary, as required by RBI’s guidelines. To make the investment, Paytm is required to get the necessary approvals from the government.
Paytm made an application to the Indian government regarding past downward investment from its parent One 97 Communications into Paytm Payment Services. This action was taken to ensure compliance with the FDI rules.
“To clarify, the investment of INR 500 Mn was made from the OCL’s existing cash reserves and no Chinese capital was raised by OCL after the introduction of Press Note 3 of 2020. Further to add, the INR 500 Mn was the capital required to comply with RBI’s minimum net worth rules and fund the cash requirements of PPSL,” Paytm said earlier in a blog post on April 16.
The development comes at a time when Paytm is trying to recover from the RBI’s clampdown on Paytm Payments Bank Limited (PPBL)
Paytm’s loss more than tripled to INR 550.5 Cr in the March quarter of the financial year 2023-4 (FY24) from INR 167.5 Cr in the year-ago period. Revenue from operations declined 2.9% to INR 2,267.10 Cr during the quarter from INR 2,334 Cr in Q4 FY23.
Shares of Paytm ended today’s trading session 2.17% lower at INR 461.80 on the BSE.
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