Domestic Investors Rally Behind Paytm As FPI Shifts: Retail Stake Climbs, Global Fund Entries Increase

Domestic retail investors have significantly upped their stake in Paytm by 1.68%, indicating a vote of confidence amidst tumultuous times for the fintech giant. The surge in retail interest coincides with the entry of new foreign portfolio investors, marking a shift in the ownership pattern of One 97 Communications, the parent company of Paytm.

According to the latest quarterly shareholding pattern ending March 2024, retail investors now command a 14.53% stake in Paytm, a leap from the preceding 12.85%. This surge is attributed to bolstered confidence from mutual funds (MFs), which also escalated their holdings during the same period. MFs now hold 6.15% in Paytm, up from 4.99% in the previous quarter. Notable among these are Mirae Asset Mutual Fund and Nippon India Mutual Fund, which saw significant increases in their stakes.

Meanwhile, the aggregate stake held by domestic institutional investors, including alternate investment funds and insurance companies, witnessed a rise of 0.8% to 4,35,68,764 shares. However, provident funds or pension funds seemed to have exited, while non-resident Indians (NRIs) augmented their shares by 0.85% in the same quarter.

This interest from domestic institutions arrives amidst a downturn in Paytm's fortunes following the Reserve Bank of India's ban on its banking partner entity, Paytm Payment Bank Limited (PPBL), announced on January 31. The ban triggered a sharp decline in Paytm's shares, plummeting nearly 50% and reducing the market capitalization to Rs 25,600 crore.

While domestic investors rally, foreign portfolio ownership in Paytm has witnessed a shift. Foreign institutions now hold 60.40% in the fintech firm, down from 63.72% previously, due to a decline in foreign direct investment (FDI). Despite this, Foreign Portfolio Investors (FPIs) Category 1 and 2 have raised their stakes by over 15 million shares.

Softbank (SVF India Holdings (Cayman) Limited) reduced its exposure to a 1.40% stake in Q4FY24. However, new players have entered the arena. New York and Hong Kong-based Tiger Pacific Master Fund made a notable entry, acquiring 65,79,135 shares at a 1.04% stake. Tiger Pacific, founded by Run Ye, Junji Takegami, and Hoyon Hwang, is known for its strategic investments, recently injecting $25 million into B9 Beverages, the company behind Bira 91 beer.

Following suit, Goldman Sachs (Singapore) Pte, Societe Generale, Morgan Stanley Asia (Singapore) Pte, and Norway's Government Pension Fund Global have also made significant investments under the ODI route, collectively accounting for a 5.85% stake.

The entry of these global funds signifies renewed interest and confidence in Paytm despite recent setbacks. With shifts in ownership and growing retail investor participation, the future trajectory of Paytm amidst evolving regulatory landscapes and market dynamics remains a topic of keen observation.