Chinese fintech giant Ant Group is considering selling its 30% stake in Indian digital payment giant Paytm amid border tensions and a toughening policy check in place.
The Ant Group’s possible exit from Paytm would mark another reversal for the Chinese company hot on the heels of the dramatic suspension of its $37 Bn stock listing last month, which would have been the world’s largest.
Financial details of the possible transaction have not been firmed up and Ant, the Alibaba-backed payments-to-consumer credit behemoth, has not launched a formal sale process yet, four people told Reuters.
Both Ant and Paytm said that the information was incorrect. A Paytm spokesman said, “The information is absolutely false and misleading. There has been no discussion with any of our major shareholders ever, nor any plans, about selling their stake or becoming the controlling shareholder.”
Paytm, which is also backed by SoftBank Group Corp among others, was valued at about $16 Bn during its latest private fundraising round a year ago. At that valuation, Ant’s stake in the Indian firm is worth about $4.8 Bn.
The main trigger for Ant to consider the divestment of its stake in Paytm is the worsening diplomatic relations between India and China in the past few months, said the people, who declined to be named as the deliberations are confidential.
In recent times, India has also toughened its FDI norms and tightened vigil over investments from its neighbours especially China. The Indian government has also banned 220 Chinese apps with the prospects of that number likely to go up soon.
On November 24, that government in its fourth installment banned 43 apps since the India-China border skirmish erupted. The government had first banned 59 apps, including TikTok, WeChat, followed by another set of 47 apps in July, which were proxies of the banned apps.
On September 2, it banned 118 Chinese mobile apps, which included the popular gaming platform PUBG as well as Baidu, which is China’s largest search engine provider.
Recently, announcing its financials, Paytm revealed that it had managed to increase its revenues to INR 3,629 Cr with 40% reduction in losses in the financial year 2020, ending March.
In the financial year 2019, the company had recorded a loss of INR 4,217.20 Cr on a consolidated basis and INR 3,232.01 Cr in revenue. It had also bared expenses worth INR 7,730 Cr in FY19 versus INR 4,864 Cr in FY18. The company’s debt levels had also increased to INR 695.4 Cr in the same period.