SoftBank Looks To Sell Paytm Stake Worth $200 Mn Ahead Of Lock-In Expiry

Japanese tech investor SoftBank is reportedly gearing up to sell 4.5% of its stake in fintech giant Paytm as the deadline for the expiry of the lock-in period for pre-IPO investor approaches.

According to Bloomberg, SoftBank plans to sell 29 Mn shares of Paytm’s parent entity, One97 Communications, in a bulk deal. As per the contours of the deal, the investor plans to sell the shares in the price range of INR 555 and INR 601.45 apiece.

While the report noted that the lock-in period expired on November 15, a Paytm spokesperson told Inc42 that the deadline ends on November 18. Bank of America will be the sole book runner for the bulk deal.

At the lower end of the transaction, the deal could fetch SoftBank $197 Mn (around INR 1,609 Cr), while the higher end of the deal could help the tech investor earn $214 Mn (INR 1,744 Cr). 

The price of INR 555 represents a hefty discount of nearly 7.7% compared to the stock’s closing price of INR 601.3 on the NSE on Wednesday (November 16). SoftBank currently owns around 17.5% of the fintech major’s total outstanding shares, valued at $900 Mn. 

This comes barely a week after SoftBank released its financial numbers for Q2. Paytm was the only company in its Indian portfolio that added to its loss.

The fintech major contributed a loss of $500 Mn to SoftBanks’ kitty during the quarter ended September 30, 2022. Against an investment of $1.4 Bn by SoftBank in the fintech player so far, Paytm’s valuation stood at $900 Mn at the end of the quarter. 

As the lock-in expiry approaches, there are apprehensions about a sell-off in Paytm. 

If SoftBank’s bulk deal goes through, Paytm will join a growing list of new-age tech companies that have seen many of their pre-IPO investors walk out after the expiration of their lock-in period. Many institutional investors such as Uber, Sequoia, Moore Strategic Ventures and Tiger Global offloaded their stakes in Zomato after its lock-in expiry.

Beauty ecommerce platform Nykaa also saw many of its institutional investors sharing their stake post the lock-in expiry. The selloff saw Lighthouse India Fund III selling 3 Cr shares worth INR 252.4 Cr in a bulk deal. Others such as TPG Growth, Narotam S Sekhsaria and Mala Gopal Gaonkar also exited the startup in bulk deals. 

PB Fintech has also been hit badly in the melee. Last week, anchor investor Tiger Global offloaded 3.57% of its stake in Policybazaar and then followed it up with another divestment of 2.98% stake in the new-age tech startup. 

Amid the global economic slowdown and the rout in new-age tech stocks, investors are worried about profitability of startups like Paytm. However, the fintech giant claims that it is on the path to break even by the end of 2023. 

Paytm reported a 21% rise in its net loss to INR 571 Cr in Q2 FY23 from INR 474 Cr in Q2 FY22. Revenue from operations grew 76% year-on-year to INR 1,914 Cr during the quarter.

Overall, Paytm has also been reporting positive numbers across operational metrics such as loan disbursals, merchant subscription revenue, bill payments and others. 

It is these positive numbers because of which Paytm still enjoys the backing of major brokerage firms. Last week, at least four brokerages, including BofA Global Research, J.P. Morgan, and Citigroup, raised their price targets for fintech giant Paytm after the announcement of its Q2 FY23 results. 

Shares of Paytm ended 4% lower at INR 601.55 on the BSE on Wednesday. This number stands in stark contrast with the record high of INR 1,961.05 it achieved in November last year. From there, the stock has tanked by nearly 70%, wiping off crores of investor wealth.