Amid Paytm crisis, in the June quarter, Japanese Softbank Vision Fund exited from the Indian fintech major Paytm, with a loss of approximately $150 million, as reported by PTI. Previously, Softbank had invested around $1.5 billion in One 97 Communications, Paytm’s parent company, through multiple tranches in 2017.
Softbank divested its stake in Paytm during the April-June quarter of FY25, suffering a 10-12% loss on its investment. The company had previously held a significant 18.5% stake in Paytm before the fintech giant went public in 2021.
Softbank held a total of 18.5% stake in Paytm through two entities: SVF India Holdings (Cayman) Ltd (17.3%) and SVF Panther (Cayman) Ltd (1.2%). During the IPO, SVF Panther sold its entire stake for ₹1,689 crore ($225 million), while SVF India Holdings (Cayman) Ltd sold its remaining 1.4% stake in the fintech major, totaling 18.5% stake sold.
Softbank exited Paytm as planned, two years after the company’s IPO. Although the move was anticipated, sources revealed that Softbank had not expected to incur a loss at the time of its exit. Notably, Softbank had purchased Paytm shares at an average price of approximately ₹800 per share.
Warren Buffett’s Berkshire Hathaway exited Paytm, selling its 2.6% stake at a loss. It had bought the stake for ₹1,279.7 per share (₹2,179 crore total) but sold the shares for ₹877.29 each (₹1,370.63 crore total) in November, as per official documents. Berkshire Hathaway sold its Paytm stake at a lower price than it acquired it for, incurring a loss on its investment.
Paytm’s stock price has struggled since its listing in November 2021, debuting at ₹1,955, a 9% discount from its issue price of ₹2,150. The stock has yet to reach its issue price. The sharpest decline occurred after the Reserve Bank of India (RBI) imposed a transaction ban on Paytm Payments Bank Ltd, a related entity. On May 9, the stock plummeted to its all-time low of ₹310.
Paytm’s losses increased to ₹550 crore in the fourth quarter of 2023-24 (Q4FY24) due to the ban on transactions related to its payments bank. The company took a ₹227 crore write-off on its 39% stake in Paytm Payments Bank Ltd (PPBL), citing uncertainty around the business’s future operations and potential regulatory developments.
In the fiscal year ending March 31, 2024, Paytm’s losses decreased to ₹1,422.4 crore, compared to ₹1,776.5 crore in the previous year (FY23). Despite this improvement, Paytm’s shares fell 2.47% to ₹467.25 per share on the Bombay Stock Exchange (BSE) on Friday, July 12.
This month, StoxBox, a domestic brokerage firm, identified Paytm’s stock as a compelling buy due to potential trend reversal patterns. According to StoxBox, Paytm’s extensive reach and user base enable it to generate revenue from both merchants and consumers, creating opportunities for cross-selling and making it an attractive investment opportunity at current levels.
The brokerage expects Paytm’s continuous enhancements in operational efficiency to sustain its profitability.
“Paytm expects to achieve breakeven in EBITDA FY25 and is ahead of its guidance. However, due to temporary disruption in operating metrics, there will be an incremental EBITDA impact of ₹100 crore – ₹150 crore in Q1FY25. The company is confident of improvement from Q2FY25, as it restarted certain paused products and achieved steady growth in operating metrics,” said StoxBox in a statement.
ⓘ With inputs from Livemint
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