SoftBank Sells 2.07% Stake In Paytm To Adhere To SEBI Takeover Rules

SoftBank disclosed on Thursday that it had sold 2.07% of One 97 Communications, the company that manages the fintech platform Paytm, in a series of open market transactions since February 2023 in order to adhere to takeover rules set by market regulator Sebi.

"SVF India Holdings (Cayman) has disposed of an aggregate of 13,103,148 equity shares of One 97 Communications Limited in a series of disposals undertaken between February 10, 2023 to May 8, 2023, with the disposal on May 8, 2023 breaching the 2% threshold specified in Regulation 29(2) of the SEBI Takeover Regulations," SoftBank informed stock exchanges.

SoftBank's 13.24% ownership of Paytm has now been reduced to 11.17% as a result of the stock sale. Although the overall sale's market value was not disclosed in the regulatory filing, reports indicated that it may have been valued around $120 million.

An earlier ET story said that Ant and SoftBank intended to depart Paytm by progressively selling shares in the market.

Alibaba Group affiliate Ant Group was reportedly in talks to sell shares in the company through a secondary block offer after China's Alibaba Group sold 3.3% of Paytm through the open market in a Rs 1,378 crore deal.

With a 25% interest, Ant group (formerly Ant Financial) remains the sole major shareholder in the Noida-based company.

Paytm CEO Vijay Shekhar Sharma owned 9.13% of the company, according to the shareholding patterns for the March quarter.

Shares of Paytm, which have increased by over 33% so far in 2023, were trading today at almost 3% less on the BSE at Rs 706.75. The payments company, which was in jeopardy due to increasing losses, is now said to be getting closer to reaching profitability.

Paytm's combined net loss for the quarter ending in March decreased from Rs 761 crore a year earlier and Rs 392 crore the previous quarter to Rs 168 crore.

Operating-wise, the business recovered and generated EBITDA (before ESOP cost) profitability of Rs 101 crore for the second quarter.

"Our next milestone is to make Paytm free cash flow positive in the near future. This has been possible by disciplined resource allocation and focusing on what has become our core revenue and growth driver - Payments and financial services distribution business," Sharma had said after Q4 results.

Foreign brokerages Goldman Sachs and Macquarie both hold 'Buy' ratings on the company, while Macquarie has maintained an 'Outperform' recommendation.

"We believe these results should largely put to rest debates around Paytm's business model traction and profitability, and we see resolution of outstanding regulatory issues (ban on PPBL and online merchant onboarding) as the next set of catalysts for the stock," Goldman had said, adding that it sees the risk-reward ratio as skewed to the upside, with 103% potential upside in a bull case vs. 17% downside in a bear case.