Vijay Shekhar Sharma as Paytm's largest shareholder: How the CEO wants to make the fintech firm more profitable

Vijay Shekhar Sharma, Chairman, MD and CEO of One97 Communications that operates fintech platform Paytm, has made a smart move. By acquiring a 10.3 per cent stake in One97 from China-based Ant Group, he has eliminated possible regulatory concerns around Chinese presence in the firm, while consolidating his stake at close to 20 per cent. Now the challenge lies in resolving the pending regulatory issues with the Reserve Bank of India, even as Paytm moves towards profitability.

Under the no-cash deal, Ant’s stake will be transferred to Sharma’s Netherlands-based wholly-owned investment company, Resilient Asset Management. In return, Ant will receive optionally convertible debentures (OCDs) worth around $628 million. While there will be no obligation on Paytm to pay any fixed returns on the OCDs, they can be converted into equity. And Ant will retain the economic value of the stake, along with the 13.5 per cent it still holds in the company. The maturity of the OCDs is also long-dated. 

While the deal has made Sharma the largest shareholder in the company, the bigger question is whether the deal will find favour with RBI. Many suggest that this deal will pave the way for Paytm’s entry into the payments aggregator business, as well as help it convert its payments bank into a small finance bank (SFB). “The perception of Chinese holdings in the company and the possible perceived risk in the future are no longer valid,” says a consultant. 

In November last year, RBI had asked Paytm’s subsidiary Paytm Payments Services Limited (PPSL) to reapply to become an online payments aggregator, while allowing it to continue on-boarding new offline customers, and serving its existing customers, but barred it from taking on any new merchants. RBI had also given PPSL time to comply with the government’s FDI guidelines. 

Another challenge that the group is facing is with its payments bank Paytm Payments Bank that has been prohibited by RBI from enrolling new customers since March 2022, citing certain supervisory issues. Despite the challenges, Sharma has said that the company aims to achieve positive free cash flow by the year’s end as it progressively reduces its losses. Its total income recorded a 54 per cent jump at Rs 6,027 crore in FY23, accompanied by a decrease in net loss from Rs 2,325 crore in FY22 to Rs 1,855 crore in FY23.    

@anandadhikari