Antfin, an arm of Jack Ma’s behemoth Ant Group, sold 10.3 percent of its stake in the Indian fintech Paytm to Vijay Shekhar Sharma, its founder, in a deal worth about $628 million announced on Monday.
Mr. Sharma, who is also Paytm’s CEO, is looking to simplify Paytm’s ownership structure amid larger worries about Chinese involvement in Indian fintech companies. With the sale, he would become the company’s largest stakeholder, with a 19.42 percent stake. Antfin’s holding in Paytm will consequently fall to 13.5 percent.
The deal has an interesting structure in which Sharma—through his shell entity Resilient—and Ant Financial, will retain divided ownership and economic interests.
While Resilient will receive ownership and voting rights to the 10.30 percent block, for which no cash payment will be made, the shell company will instead issue Optionally Convertible Debentures to Antfin. This will allow Mr. Ma to enjoy the economic value of the sold stake that will also indicate his continued faith in Paytm’s business potential.
Paytm added that Sharma will not provide any pledge, guarantee, or other value assurance, either directly or indirectly.
Antfin’s selldown, which comes after Mr. Ma’s Alibaba sold its entire stake in Paytm in February, was not unexpected. Following the three-month-long standoff between the Indian and Chinese armies at Doklam (the tri-junction of India, Bhutan, and China) in June 2017, the Indian government has been blocking most Chinese investments into India.
Over the previous three years, India has also blacklisted over 200 Chinese apps.
Japan’s Softbank Group Corp., another early-stage investor in Paytm, has been cutting its stake too in Paytm through open market deals, with its holding down to 9.18 percent after a 2 percent stake sale in mid-July.
Selling Antfin’s stake in Paytm, hence, could help Mr. Ma avoid potential conflicts and political backlash, or legal challenges with the Indian government, which has been wary of Chinese investments and influence in its digital sector.
Safe Move
The deal could carry several other benefits for Mr. Ma as well. For one, it could reduce the regulatory pressure from the Chinese authorities, who have been cracking down on Ms. Ma’s businesses since his inflammatory speech in October 2020, which sparked an unprecedented crackdown on other digital companies across the country.Mr. Ma, previously Asia’s richest person—now with a net worth of around $30 billion, according to the Bloomberg Billionaires index—lost half of his fortune from his peak of $61 billion in 2020 when he plunged into these problems.
Mr. Ma has kept a low profile since then. He has reportedly spent time in Japan, home to his friend and Alibaba investor, SoftBank CEO Masa Son, and in Hong Kong in recent years. He has reportedly started a new gig as a visiting professor at a Tokyo university, and is spending more time on philanthropy.
By divesting from Paytm, Antfin may be perceived as less of a threat to China’s financial system and more compliant with the rules. That apart, the deal could allow Ma to focus more on his core businesses in China and other markets, which still offer plenty of opportunities and challenges.
For instance, Antfin, formerly known as Ant Financial, is the world’s largest fintech company, and offers a plethora of financial services such as payments, wealth management, insurance, credit scoring, and consumer lending. Antfin also operates Alipay, touted as the world’s largest mobile and online payment platform, with over 1.3 billion users.
Besides Paytm, Antfin has investments in other fintech companies around the world, such as bKash in Bangladesh, and GCash in the Philippines
Yet, both Alibaba and Ant Group face increasing competition from rivals like Tencent, JD.com, Pinduoduo, and ByteDance, aside from issues in dealing with changing consumer preferences, technological innovations, and social responsibilities.
By selling Antfin’s stake in Paytm, Mr. Ma may be able to allocate more resources and attention to his domestic and global ventures.
For Sharma, too, the going has been rough ever since Paytm shares crashed right after the listing of its IPO in November 2021. Concerns about the company’s business strategy and broader concerns about high valuations for loss-making digital companies, were largely responsible for this dismal stock market debut.
According to a recent Paytm disclosure to the markets, the government’s concerns regarding the large Chinese shareholding in Paytm had also been one of the reasons Paytm has been facing headwinds in its expansion plans.
Last November, for instance, India’s central bank, the Reserve Bank of India (RBI) rejected Paytm’s payment aggregator’s license application, although it granted the business an extension to reapply in March. Subsequently, the RBI had also barred Paytm from accepting new online merchants while allowing it to continue providing payment services to its existing online retailers.
