Paytm surges as Vijay Shekhar Sharma’s stake buy unseats Antfin as largest shareholder

Vijay Shekhar Sharma will acquire 10.3 percent stake in Paytm from Antfin through an off-market transfer. On closing of this transaction, Sharma’s shareholding in Paytm will increase to 19.42 percent

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The Paytm share price surged over 10 percent in early trade on August 7 as its founder and chief executive officer Vijay Shekhar Sharma announced a 10.3 percent stake purchase in the company.

According to the exchange filing, an overseas entity owned by Sharma will pick up 10.3 percent in Paytm from Antfin through an off-market transfer. On closing of this transaction, Sharma’s shareholding in the company will increase to 19.42 percent, whereas Antfin’s stake will reduce to 13.5 percent.

At 9:45am, the Paytm stock was quoting at Rs 850.75 on the NSE, higher by 6.8 percent from its previous close. Trading volumes at 6 million shares were significantly higher than the 20-day average volume of 3.4 million shares.

As per Bloomberg, the 12-month consensus target price on the stock is Rs 1,018, indicating 19.7 percent upside from current levels.

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In November 2022, Antfin Holdings, Alibaba.com, Berkshire Hathaway, Elevation Capital and SAIF Funds became eligible to sell their holdings as the lock-in period mandated for pre-IPO investors ended.

Antfin Netherlands Holding had acquired over 25 percent stake in the company between 2015 and 2019 at an average cost of Rs 300 a share. It sold ~2 percent stake in January, bringing its stake down to 23.8 percent.

After the transaction with Sharma, Antfin will no longer remain the largest shareholder in the fintech major. There is also no nominee of Antfin on the Paytm Board.

However, Sharma is making no cash payment for this acquisition which means Antfin is not booking any profits from this partial exit as of now. As per the agreement executed between the parties, Antfin will be issued Optionally Convertible Debentures (OCDs), which in turn will allow Antfin to retain economic value of the 10.30 percent stake.

Optionally Convertible Debentures provide companies with the flexibility to convert them into equity shares at a later stage.

“This demonstrates Antfin’s continued confidence in the business potential. No cash payment will be made for this acquisition, and neither will any pledge, guarantee, or other value assurance be provided by Sharma,” as per the exchange filing.

Q1 results

The sentiment around Paytm has remained upbeat in this year so far, buoyed by consistent improvement in financial performance. Its consolidated net loss narrowed to Rs 357 crore for the quarter ended June. It was Rs 644 crore in the year-ago period.

Revenue from operations during the June quarter rose 39 percent to Rs 2,342 crore as against Rs 1,680 crore clocked in the previous year quarter.

Also Read: Paytm’s merchant payment volumes up 39% to Rs 1.47 lakh crore in July, disbursements jump 148%

Furthermore, Paytm recorded merchant payment volumes at Rs 1.47 lakh crore for the month of July, growing 39 percent on a year on year basis. Loan distribution business (in partnership with lender partners) continued to gain scale with disbursements of Rs 5,194 crore, growing 148 percent YoY, with 43 lakh loans disbursed in July 2023 through the Paytm platform, rising 46 percent YoY.

Brokerage views

Foreign brokerages are firmly bullish on the stock, with target prices pegged upwards of Rs 1,000. With Antfin transferring part of its stake to Sharma, a key overhang of selling pressure by one of the biggest pre-IPO investors is now also behind.

Brokerage firm Goldman Sachs said Paytm is firmly on track to be the most profitable India internet company starting FY25 and suggested a target of Rs 1,200 on the stock.

JPMorgan has suggested a target of Rs 950 on the stock. Key stock drivers from here are likely to be the clearance of regulatory overhangs and free cash flows (FCF) and profit after tax (PAT) breakeven, the firm said. “We think Paytm can be the first Indian B2C internet stock to trade on profit rather than revenue multiples,” it said.

Meanwhile, BofA Securities suggested a target of Rs 1,020 on the stock.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.​​​​​​​