Paytm lock-in expiry: Gains for Antfin, Alibaba and Elevation Capital, loss for Buffett

Alibaba, Antfin and SAIF Partners are likely to be first in line to sell their holdings in the fintech giant, as per market observers

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After Nykaa and PB Fintech, it’s time for early investors of Paytm, some sitting on up to 6X gains, to take a call on their investments in the marquee fintech firm.

About 86 percent of Paytm parent One97 Communication’s shareholding, or about 556 million shares, will be released from pre-initial public offering (IPO) lock-in this week.

While most reports have pegged the expiry date as November 18 (one year since listing), some IPO watchers say it could be as early as November 14 (one year since the finalisation of BOA, or basis of allotment).

After the date, Antfin Holdings, Alibaba.com, Berkshire Hathaway, Elevation Capital and SAIF Funds will be eligible to sell their holdings. Founder Vijay Shekhar Sharma will also be able to offload his 8.9 percent stake, which amounts to 57 million shares.

Additionally, Axis Trustee Services holds 30.97 million shares, or a 4.8 percent stake, on behalf of Sharma, which will also be released from lock-in.

Huge gains

While Sharma’s cost of acquisition is not available, data from Goldman Sachs Investment Research suggests that other pre-IPO investors are sitting on 2X gains, with a few exceptions.

For instance, Antfin Netherlands Holding, which has a 25 percent stake in the company, acquired shares between 2015 and 2019 at an average cost of Rs 300 a share. Paytm’s current market price of Rs 634 (as of November 11 close), indicates a 111 percent notional gain for Antfin.

Also read: SoftBank won’t hasten exit from $1.8-billion holdings in Paytm, Policybazaar, Delhivery as lock-in expiry nears

Elevation Capital (now rebranded to SAIF Partners) holds a 16 percent stake. The early-stage fund first invested in Paytm in 2007. After participating in multiple rounds till 2019, its average cost of acquisition stands at a little over Rs 100. The fund is now sitting on 6X returns.

With a 6.26 percent stake, Alibaba.com invested in Paytm in 2015 at an average cost of acquisition of Rs 330. This indicates 1.9X returns.

Also Read: Paytm CEO Vijay Shekhar Sharma ‘optimistic’ on lending as firm close to EBITDA profitability

Losses, too

Softbank and Berkshire Hathaway are nursing heavy losses as lock-in expiry ends. Masayoshi Son’s SVF India Holdings has a 17.45 percent stake in the company with the average cost of acquisition at Rs 900 a share. His investment is down 29.5 percent, while Warren Buffett’s is down 51.2 percent. Berkshire Hathaway has a 2 percent stake in the company with an average cost of acquisition at Rs 1,300 per share.

Last week, when Nykaa’s pre-IPO lock-in expired, the Street saw Lighthouse India Fund, TPG Growth and HNI Narotam Sekhsaria offload their stakes. These were picked up by Norges Bank, Aberdeen and Morgan Stanley Asia (Singapore) Pte.

Similarly, PB Fintech–operator of Policybazaar–saw its lock-in expire on November 10, following which Tiger Global Eight Holdings and Internet Fund III Pte sold a total of 1.6 crore shares.

With Alibaba, Antfin and SAIF partners sitting on gains, chances are that they will be first in line to sell their holdings in the fintech giant, as per market observers. However, their gains have fallen significantly as the stock has tumbled close to 60 percent since the listing day.

Also read: The biggest losers of Nykaa bonus issue are IPO retail investors

Sharma has reassured shareholders. “One year ago, we made our way to the public markets. We are aware of the expectations that Paytm carries, and I assure you that we are on the right path to profitability and free cash flows,” he said.

In Q2FY23, Paytm’s loss widened to Rs 571.5 crore from a loss of Rs 473.5 crore in the same period last year while revenue shot up 76 percent.

On November 14, The stock closed at Rs 635 on the National Stock Exchange, up 0.47 percent.