Paytm to sell stake in PayPay to SoftBank for $250M
One97 Communications, the parent company of Indian fintech giant Paytm, is close to finalizing a deal to sell its stake in Japan's digital payments firm, PayPay Corporation. The proposed transaction with SoftBank Group is worth $250 million (approximately ₹2,000 crore). The move comes as part of Paytm's strategy to divest non-core assets and strengthen its capital base while expanding its core payments business.
Paytm's shares surge amid regulatory challenges
Paytm's shares hit a 52-week high on December 5, marking an incredible 185% six-month gain. Analysts attribute the surge to the resolution of regulatory issues and an optimistic growth outlook. The company already has a cash balance of over ₹10,000 crore. The upcoming deal with SoftBank will further pump up the figure to about ₹12,000 crore, giving Paytm ample resources for future expansion.
Paytm's financial stake in PayPay Corporation
During a recent earnings call, Paytm's CFO Madhur Deora revealed that the company holds stock acquisition rights in PayPay Corporation. These rights would translate into a 5.4% stake once exercised, with a carrying value of around ₹2,000 crore. The term "carrying value" refers to the value recorded by Paytm on its financial statements for its stake in the firm.
PayPay Corporation's potential US listing and valuation
In July 2023, Reuters had reported that PayPay was considering a US listing to capitalize on higher valuations. A SoftBank executive had previously estimated the company's valuation at around ¥1 trillion ($6.8 billion). This potential market expansion could significantly impact the financial dynamics of the deal between Paytm and SoftBank.
A look at Paytm's association with PayPay
Paytm's partnership with PayPay goes back to 2018 when the companies worked together to introduce QR-code-based cashless payments in Japan. Back then, SoftBank was among the biggest shareholders in Paytm via its Vision Fund. However, gradually, the Japanese tech investor cut its stake and completely exited the firm in June 2024.
Paytm's strategic shifts and financial performance
Paytm has been making strategic shifts to reclaim its place in the fintech space after facing regulatory hurdles earlier this year. The company posted a profit of ₹930 crore in the September quarter, a major turnaround from a ₹290 crore loss a year ago. This was primarily due to profits from the sale of its entertainment ticketing business, Insider, to Zomato for ₹2,048 crore.
