One97 Communications, the parent entity of Paytm, on Wednesday called the news report of Adani Group chairman Gautam Adani looking to buy a stake in the digital payments firm "speculative".

Paytm clarified that it is not engaged in any discussions with the Adani group after The Times of India reported that Adani and Paytm founder and CEO Vijay Shekhar Sharma met in Ahmedabad to chalk out the contours of the deal.

Reacting to the development, shares of Paytm rose 5% in opening trade to hit a high of ₹359.55 on the BSE. The digital payments firm’s market cap stood at ₹22,859 crore.

Paytm founder Sharma owns around 19% stake in One 97 Communications. Its other largest shareholders include venture capital firm Elevation Capital which owns 15% stake and Alibaba's Antfin which holds 10% stake.

Paytm’s potential deal with Adani may involve a secondary share sale as the company is not looking to raise primary capital, reported The Arc. Paytm's cash balance stood at ₹8,650 crore at the end of the quarter ended March 2024.

In the UPI ecosystem, Paytm competes with Walmart's PhonePe and Alphabet's Google Pay.

In 2021, the Adani Group acquired a significant minority stake in Cleartrip, an online travel aggregator owned by Walmart-backed Flipkart.

The Reserve Bank of India (RBI) ordered Paytm Payments Bank (PPBL) to stop accepting fresh deposits in its accounts and wallets from March 15. Paytm Payments Bank is 51% owned by Paytm founder and CEO Sharma while the remaining 49% is owned by One97 Communications.

Paytm Payments Bank products like the Paytm wallet and FASTag were distributed by Paytm.

Due to the current embargo on these products, Paytm anticipates the steady state annualised direct impact on EBITDA to be around ₹500 crore. Most of this impact will be in the first quarter of 2024-25 as these products were operational during most of Q4 FY24.

Paytm founder Sharma last week said that the company will prune non-core businesses. Paytm is working on significant cost efficiencies including leaner organisation structure, he said. Paytm plans to cut down its employee costs, leading to savings of ₹400-₹500 crore.

One97 Communications’ loss widened to ₹550 crore for the quarter ended March 31, 2024 compared with ₹167 crore in the corresponding period a year ago. Loss widened due to impairment of ₹227 crore towards the carrying value of Paytm's investment in Paytm Payments Bank.

The digital payments firm's revenue from operations fell 3% year-on-year to ₹2,267 crore during the fourth quarter as against ₹2,334 crore in Q4 FY23.

Paytm’s fourth-quarter results were impacted by temporary disruption on account of the UPI transition to other banking partners and permanent disruption because of the banking regulator’s restrictions on Paytm Payments Bank.

“We expect near-term financial impact to our revenue and profitability, due to disruptions faced in our business in Q4. This includes steady state impact due to pausing of PPBL wallet. We had also paused a few other payments and loan products to our customers during the last quarter,” said Sharma.

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