How Vijay Shekhar Sharma's Title As Largest Shareholder Led Paytm Shares To Rally By 99% From 52-Week Low?

One 97 Communications, famously known as Paytm, faced a similar heat after its listing where new-age companies that witnessed strong demand in their IPOs were going downhill after their market debut amidst fundraising winter. Paytm stock was valued at Rs 2,150 in its IPO's final price, listed at a 9% discount, as time passed, the stock fell in multi-fold to reach below Rs 500 in November last year due to the ending of the pre-IPO investors' lock-in period. Paytm corrected massively, as investors exited! But the year 2023 has been of fresh upsides for Paytm, and with its founder Vijay Shekhar Sharma emerging as the largest shareholder, the stock on Tuesday reached 99% higher from its 52-week lows.

On Tuesday, on BSE, Paytm shares rallied by at least 2.09% with an intraday high of Rs 874.70 apiece --- this is a 99% upside from its 52-week low of Rs 439.60 which was recorded on November 24, 2022.

Right after becoming the largest shareholder, Vijay Shekhar Sharma in an interview hinted at further stake purchase in his Paytm.

Reuters reported that Vijay Shekhar Sharma said on Monday he is open to increasing his stake in the Indian fintech firm if there are sellers, weeks after he became the largest shareholder in the company by buying a stake from Chinese firm Antfin. He told the news agency that Paytm is truly an Indian company. It is a milestone that I'm able to acquire more stake in my company.

Sharma revealed that although Antfin has not indicated that they want to sell (a further) stake at the moment if they do, he is going to jump at any opportunity to buy more equity in Paytm.

In the last few weeks, Antfin's total shareholding in Paytm has significantly reduced from 23.79% after it sold a 10.3% stake to Resilient Asset Management B.V., an overseas entity 100% owned by Vijay Shekhar Sharma. This was followed by the sale of another 3.6% in block deals.

Accordingly, Sharma became the only SBO of the company, consequent to the change of shareholding. The total share capital of Sharma in OCL, both direct and indirect, is 19.42% making him the sole SBO of the company. However, Paytm remains a professionally managed company with no identified promoter. As per Indian laws, for anyone to be identified as a promoter, the shareholding has to be above 25%.

With Sharma becoming the largest shareholder, analysts believe that this will remove the Chinese overhang from Paytm's stock.

BofA Securities in its earlier report had said that buying this stake in Sharma "indicates his confidence in the story with a 'skin in the game's approach show". It added that this reduces the risk of some other strategic investor coming who would have a major stake like Sharma's.

Also, when Sharma and Antfin's stake deal circulated in August, Dolat Capital mentioned this transaction by Paytm would possibly imply faster resolutions around Paytm Payments Services Ltd. wherein it is not allowed to onboard new online merchants. It added that such would also reduce the risk of any hostile transaction as now VSS would be the largest shareholder.

Both Dolat Capital and Bofa have given a buy rating on Paytm with a target price of Rs 1,250 and Rs 1,020 going forward.

Year-to-date, Paytm shares have rallied by a whopping 63.25% on BSE. Although the share price is still far away from its listing price of Rs 1,955 and IPO final issue price of Rs 2,150, Vijay Shekhar Sharma's ownership and further stake purchase news comes as a positive factor as it is expected to clear off certain overhang, that has been a spoilsport for true potential upside in this fintech on exchanges.

Paytm shares debuted on the market on November 18, 2021.

Apart from this, Paytm also announced its operating performance for August 2023, where it sustained its growth in payments and loan distribution business.

In August, Paytm maintained its leadership in offline payments strengthened with 87 Lakh devices deployed, while the value of loans distributed through the Paytm platform at Rs 5,517 crore ($667 million).

Furthermore, average monthly transacting users (MTU) stood at 9.4 crore for the quarter to date (average for July & August 2023) up 20% y-o-y, reflecting the continued expansion of our customer base. The company's Merchant Payment Volumes (GMV) for the quarter to date (for July & August) stood at Rs 3 Lakh Crore ($36.3 billion), y-o-y growth of 43%. Lastly, the fintech's loan distribution business (in partnership with our lender partners) continues to gain scale with disbursements of Rs 10,710 crore ($1.3 billion, y-o-y growth of 137%) and 88 lakh loans (y-o-y growth of 47%) disbursed in quarter to date (for July & August 2023) through the Paytm platform.

On Monday, Paytm also announced the launch of its latest innovation - Card Soundbox. With this, the company empowers merchants to accept both mobile and card payments across all Visa, Mastercard, American Express and RuPay networks through its iconic Soundbox with 'tap and pay' that will help merchants scale their business.

After the recent successful launch of Paytm Pocket Soundbox and Paytm Music Soundbox, with Paytm Card Soundbox, the company is driving further convenience for merchants.