Paytm-Airtel possible tie-up to domestic MFs raising stake: What's going on at Paytm?

Like other new-age companies, Paytm has been under pressure to turn profitable ever since its scrip got listed in late 2021. Its shares slipped about 70 per cent since its IPO launch when the price was Rs 2,150. That said, the scrip is up over 30 per cent from its 52-week low after the company reported operating profitability in the December quarter, ahead of its September 2023 guidance. But things are fast moving at One 97 Communications Limited, Paytm's parent, since last week.

Paytm’s talks with Bharti Airtel, which had earlier shown interest in acquiring a stake in the digital payments platform, are still hanging by a thread, with various reports suggesting big Chinese and Japanese investors were looking to trim stakes in the Vijay Shekhar Sharma-led company.

Here are the top 10 things happening at Paytm right now:

1. Last week, it was reported that Billionaire Sunil Mittal had sought a stake in Paytm, who wanted to merge Airtel Payments Bank and Paytm Payments Bank in a stock deal. There were reports that the telecom major was eyeing Paytm stocks owned by other shareholders in the market.

2. But on February 27, it was reported that Bharti Airtel and Paytm have failed to reach an agreement over the stake sale. Paytm management declined to hand over management control to the telecom giant as it was not keen on a strategic alliance in the payments business due to differences in the business model, a report in Moneycontrol said.

3. Paytm is currently backed by Japan’s SoftBank Group Corp. and China’s Ant Group Co. Japan's SoftBank and China's Alibaba Group are said to be in talks to offload their stake in the digital payments platform through a secondary stock deal, according to a report.

4. Earlier this month, Alibaba completely offloaded its stake in the fintech giant. The Chinese e-commerce company had a 6.26 per cent stake in Paytm, which it sold in two tranches in January and February.

5. Following this, Paytm reported that it has completed its Rs 850-crore share buyback. The company informed the exchanges on February 13 that it repurchased 15.57 million equity shares, representing 2.4 per cent of the total number of outstanding shares, at a weighted average price of Rs 545.93 per share.

6. It reported due to the buyback, the percentage stake of existing shareholders has risen on a proportionate basis, though the absolute number of shares held by them remains the same.

7. Post the extinguishment of shares repurchased via buyback, the company’s share capital base stands reduced by 15.57 million shares (ie 2.4 per cent) to 633.77 million shares, the company told the exchanges.
8. Though the large shareholders continue to hold the same number of shares on an absolute basis, their respective stakes have now increased. Jack Ma-backed Ant Group's holding in Paytm has moved up slightly from 24.86 per cent as of December 31 to 25.47 per cent now, though Ant continues to hold 161.4 million shares in Paytm.

9. Softbank is now 13.24 per cent from the earlier 12.92 per cent, Elevation Capital, via 2 entities owning >1 per cent, is now 15.45 per cent.

10. Similarly, domestic institutional shareholding has increased by 1.11 per cent on account of increase in shareholding of Mutual Funds and AIFs. Foreign institutional shareholding has reduced from 72.8 per cent to 71.9 per cent. While FDI shareholding saw a reduction, FPI Cat 1 shareholding increased from 6.7 per cent to 10.6 per cent (3.9 per cent increase).

In terms of growth, Paytm is on a strong course as per its Q3 FY23 results. The digital payments platform reported that it has achieved its milestone of operating profitability, much ahead of its September 2023 guidance.

The company's EBITDA before ESOP was at Rs 31 crore with EBITDA before ESOP margin at 2 per cent of revenues as compared to (27 per cent) a year ago. Its revenue from operations increased 42 per cent YoY to Rs 2,062 crore, mostly due to its core payments business and sustained growth momentum in credit business and commerce business.

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