Softbank cuts more stake in Paytm; stock falls 5%

Japan's SoftBank Group has further trimmed its stake in crisis-hit payments solutions company Paytm, dragging the fintech stock down by 5% in intraday trade on Thursday. The Japanese investment major, which held a 17.5% shares in Paytm’s parent One97 Communications in September 2022, has reduced its shareholding in beleaguered Indian fintech unicorn by 2.17% to 2.83%. The development came at a time when Paytm is under heavy scrutiny due to the RBI’s severe action against its associate entity Paytm Payments Bank Ltd (PPBL).

"SVF India Holdings (Cayman) Limited has disposed of an aggregate of 13,784,787 equity shares of One97 Communication Limited in a series of disposals undertaken between January 23,2024 and February 26, 2024, with a disposal on February 26, 2024 breaching the 2% threshold specified in Regulation 29 (2) of the SEBI Takeover Regulation,” Paytm said in a statement.

In the last one and half years, SoftBank has cut its stake in the company through multiple open market transactions, with the most recent in January 2024. SoftBank entity SVF India Holdings sold 12,706,807 equity shares, between December 19, 2023, and January 20, 2024, through open market transactions. 

The Japanese venture fund, which made a total investment of around $1.6 billion in Paytm, taken out $220-250 million by paring its stake in the company via IPO route in November 2021. In one of the largest IPO in India, the company raised ₹18,300 crore via the public listing of shares at an issue price of ₹2,150.

At the end of the December quarter of FY24, foreign institutional investors (FIIs) collectively held a 63.7% stake in Paytm, up from 60.92% in Q2 FY24. The number of FII/FPI investors increased from 385 to 577 in Q3 FY24.

In a similar trend, domestic institutional investors (DIIs) also raised their stake to 6.1% in Q3 FY24, from 4.1% in the quarter ended September 30, 2023.

Meanwhile, mutual funds also increased holdings from 2.79% to 4.99% in the December quarter of FY24, and the number of MF schemes rose from 19 to 23.

Reacting to the news, shares of Paytm opened lower for the third straight session at ₹392.05, down 3.5% against the previous closing price of ₹406.15 on the BSE. During the session so far, the stock declined as much as 5% to hit its lower circuit limit of ₹385.85, while the market capitalisation slipped to ₹24,610 crore.

Paytm shares have witnessed sharp correction in the last one month after the Reserve Bank of India (RBI) took action against PBBL. The shares of Paytm have plummeted nearly 50% from ₹761 at the close of trade on January 31, 2024, while it lost ₹23,726 crore in market capitalisation during the same period. The stock hit its 52-week low of ₹318.35 on February 16, 2024, while it touched its 52-week high of ₹998.30 on October 20, 2023.    

On January 31, 2024, the central bank stopped PPBL from taking new customers with immediate effect, and barred the company from taking further deposits or credit transactions or top-ups in any customer accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc. after February 29. However, in a temporary respite to the company, the RBI extended the deadline for Paytm bank customers to make deposits, access credit transactions till March 15.

Amid ongoing crisis, Paytm founder Vijay Shekhar Sharma on February 26 resigned as part-time non-executive chairman and board member of Paytm Payments Bank. Sharma owns 51% stake in PPBL, while the remaining 49% by hold by parent One97 Communications. Besides, One97 Communications has also withdrawn its nominee from the Paytm bank’s board.

The move was part of the management restructuring plan to strengthen its compliance following the RBI's action against Paytm Bank. On February 12, 2024, One 97 Communications informed exchanges that it formed a group advisory committee chaired by former SEBI chairman M Damodaran, to work with the Board in further strengthening compliance, and regulatory matters.

The reconstitution of Paytm Bank's board has paved the way for the appointment of ex-central bank chairman Srinivasan Sridhar, retired IAS officer Debendranath Sarangi, former executive director of Bank of Baroda Ashok Kumar Garg, and retd IAS Rajni Sekhri Sibal. They recently joined as independent directors of the bank.  

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