New Delhi/New York: After a protracted two-year wait, Paytm, the beleaguered fintech behemoth, seems poised to clinch India’s approval for investing in its pivotal payments gateway arm.
Insiders privy to the development disclosed to Bloomberg that the Indian government’s stance on the investment has softened, particularly in light of Ant Group Co.’s reduction in stake in Paytm.
Ant Group’s decision to pare down its stake in Paytm has catalyzed a more favorable disposition from Indian authorities. Ant’s diminished role sets the stage for imminent approval, with indications suggesting that the green light may be forthcoming within days. Given Ant’s substantial ownership in Paytm, securing federal approval for investment in its subsidiary, Paytm Payments Services Ltd., is imperative as it entails direct foreign investment.
The impending infusion of capital is poised to fortify Paytm’s payment processing arm, a pivotal facilitator of online transactions. Despite its relatively modest value, less than Rs 1 billion ($12 million), obtaining this approval would underscore Paytm’s retention of government favorability. This development unfolds against the backdrop of heightened scrutiny from the Reserve Bank of India (RBI) over the company.
In 2022, the RBI thwarted Paytm Payments Services’ bid to attain status as a payments aggregator, citing regulatory apprehensions. Moreover, the banking regulator mandated the unit to secure government clearance for a previous investment from Paytm, formerly known as One97 Communications Ltd., during a period marked by intensified scrutiny of Chinese investments.
Last year witnessed Paytm’s founder, Vijay Shekhar Sharma, orchestrating a substantial stake acquisition from Ant through a cashless transaction, catapulting him to the mantle of One97’s largest shareholder. This strategic maneuver is presumed to have engendered the government’s confidence in granting security clearance for foreign direct investment in Paytm Payments Services.
Nevertheless, the application to qualify as a payments aggregator remains in limbo before the RBI, which has also imposed a moratorium on Paytm from onboarding new online merchants since 2022. The approval trajectory for such applications pivots on satisfying regulatory prerequisites and compliance mandates stipulated by the RBI.
Paytm finds itself ensconced in a crucible of regulatory scrutiny and investor vigilance, exacerbated by the RBI’s recent directive to Paytm Payments Bank Ltd., another bastion of Sharma’s fintech domain, to desist from accepting deposits in its accounts or digital wallet post-February 29. This regulatory maneuver has dealt a substantial blow to Sharma’s aspirations, as evidenced by the precipitous decline of One97’s shares by over 40% since the RBI’s unexpected intervention.
