SoftBank Continues Stake Reduction, Selling Additional 2% Stake in Paytm

SoftBank's SVF India Holdings has continued its divestment from Paytm, selling an additional stake in One 97 Communications, the parent company of the digital payment app. In the latest transaction, SVF India Holdings sold 12,706,807 equity shares through open market transactions between 19 December 2023 and 20 January 2024 bringing its stake down to 5.01%.

SoftBank's Strategy

SoftBank, led by Masayoshi Son, has been steadily reducing its holding in listed Indian startups through public market deals. Apart from the Paytm stake sale, SoftBank's venture capital fund, SVF Growth (Singapore) Pte Ltd, also exited the online food delivery platform Zomato, fetching about ₹1,125 crore.

As of Q3 FY24, foreign institutional investors (FIIs) collectively increased their stake in Paytm to 63.7%, up from 60.09% in the previous quarter. Domestic institutional investors (DIIs) also raised their stake to 6.1%, compared to 4.1% in Q2 FY24. Conversely, retail investors reduced their stake to 30.2% in Q3 FY24 from 35% in Q2 FY24.

Berkshire Hathaway's Exit

Paytm's founder and CEO, Vijay Shekhar Sharma, maintains a 19% stake in the company. In November 2023, Warren Buffett’s Berkshire Hathaway sold its entire 2.46% stake, incurring a loss of ₹507 crore on its initial investment made five years ago. Stock has faced a decline of 65% from its IPO price of ₹2,150 per share, currently trading at ₹749.

Q3FY24 Financial Highlights

Paytm posted positive financial results for Q3FY24, with consolidated losses narrowing to ₹222 crore from ₹392 crore in the same period last year. Revenue saw a 38% YoY increase, reaching ₹2,850 crore against ₹2,062 cr from last year. In Q3FY24, Paytm surpassed 100 million active customers for the first time and is actively integrating artificial intelligence into its daily operations to enhance overall efficiency.

In response to Paytm's Q3 performance, global brokerage firm CLSA upgraded the stock from 'outperform' to 'buy' and raised the target price to ₹960 from ₹925.

Final Words

Continuous stake reduction by SoftBank in Paytm, along with the evolving ownership and the positive Q3FY24 financial performance indicate a dynamic phase for the company. Paytm's focus on AI integration and achieving milestones in active customer numbers contribute to its evolving narrative in the digital payment sector.