Paytm share gains over 3% intra-day; SoftBank cuts 2.17% stake in One 97 Communications

Japanese investment giant SoftBank Group Corporation has reportedly reduced its stake in the troubled Indian fintech unicorn Paytm by 2.17 percent, according to Reuters. The stake sale was disclosed in an exchange filing on February 29, revealing SoftBank’s ongoing reduction in ownership of the Indian payments startup.

Having held a 17.5 percent stake in Paytm in September 2022, SoftBank’s current ownership stands at 2.83 percent, down from 5.01 percent. This gradual reduction in stake has been occurring for over a year, with the most recent cut reported in January 2024.

In a BSE filing, One 97 Communications, the parent company of Paytm, stated, “SVF India Holdings (Cayman) Ltd has disposed of an aggregate of 13,784,787 equity shares of One 97 Communications Ltd in a series of disposals undertaken between January 23, 2024, and February 26, 2024, with the disposal on February 26, 2024, breaching the 2 percent threshold specified in SEBI Takeover Regulation.”

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SoftBank’s decision to sell a significant portion of its Paytm stake was driven by growing uncertainty in India’s regulatory environment, as well as concerns over the license of Paytm Payments Bank Ltd., as per Navneet Govil, the Vision Fund’s executive managing partner, in an interview with Bloomberg News on February 8.

“We felt it was prudent to start monetizing,” said Govil. “We’re glad we did a good portion of Paytm before the recent stock correction.”

While some global investors, including Warren Buffett’s Berkshire Hathaway and China’s Alibaba Group, exited Paytm in 2023, others, like a Netherlands-based unit of Chinese fintech firm Ant Financial, also reduced their stake.

After the news broke yesterday, Paytm’s shares traded down by 4 percent at Rs 391.15. The company’s stock has faced challenges, experiencing a 48.5 percent decline and losing approximately $2.8 billion in value since the Reserve Bank of India’s order on January 31. The directive mandated Paytm to wind down its banking arm, Paytm Payment Bank (PPBL), due to persistent non-compliance with regulations.

The company’s stock has faced challenges, falling by 48.5 percent and losing around $2.8 billion in value since the Reserve Bank of India’s order on January 31. The directive required Paytm to wind down its banking arm Paytm Payment Bank (PPBL) due to persistent non-compliance with regulations.

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Stock Performance and FIIs, DIIs Holding 

The stock’s performance over the past year, Paytm has delivered negative returns across various time frames. In the last month alone, the stock plummeted by 31.36%. The last six months have been particularly challenging, with a significant dip of more than 51%, indicative of a robust downtrend.

Year-to-date, Paytm shares have witnessed a 35.30% drop, underscoring the negative momentum in the current fiscal year. On a broader scale, the stock has experienced a negative return of over 31.28% in the last twelve months. As market dynamics evolve, Paytm’s resilience in overcoming recent setbacks remains uncertain.

At the close of Q3 FY24, Paytm witnessed an uptick in the collective stake held by foreign institutional investors (FIIs), reaching 63.7 percent, up from 60.09 percent in Q2 FY24. Simultaneously, domestic institutional investors (DIIs) increased their stake during the third quarter of the current fiscal year, reaching 6.1 percent, compared to the 4.1 percent recorded in the previous quarter (Q2 FY24).

(With Agency Inputs)

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