Amid increased scrutiny on Chinese investments and apps in India, Ant Financial, the fintech arm of Chinese e-commerce major Alibaba, founded by Jack Ma, is reportedly considering selling its 30% stake in Paytm. According to a Reuters report, Ant Financial has not yet launched a formal sale process and the financial details of the transactions haven’t been fixed yet either.
Paytm, however, has denied the news and termed it as false and misleading. “There has been no discussion with any of our major shareholders ever, nor any plans, about selling their stake or becoming the controlling shareholder. Our mission is to empower half a billion Indians with digital financial services and pursue the vast opportunity presented by the digital financial revolution in our country. We are seeing a dramatic increase in revenues and acceleration of our path to breakeven," a company spokesperson told TNM.
Ant first invested in Paytm in 2015, and was last part of a fundraising round in December 2019 when Paytm raised $660 million from investors including Ant Financial, SoftBank, and others. This December 2019 round valued the digital payments major at $16 billion.
In 2017, when asked about its future capital requirements in a media interview, Paytm’s founder Vijay Shekhar Sharma famously said, “Mere paas ma hai, Jack Ma”. Jack Ma is the founder of Alibaba.
Amid rising geopolitical tensions between India and China over the past year, the Union Government in April increased scrutiny on foreign investments from countries that share land border with India to curb "opportunistic takeovers”
The Union Government said at the time that government approval will be mandatory for any transfer of ownership for any existing or future foreign direct investment (FDI) in a company in India, which ‘results in change in beneficial ownership, falling under this new restriction’.
India has also banned 220 Chinese apps in India over the past few months, including popular apps such as TikTok, PUBG, Club Factory, CamScanner, among others. The latest apps banned also included Alibaba’s e-commerce platform Aliexpress and Alipay Cashier.
These worsening conditions, Reuters reports, was the main trigger for Ant to look at divesting its stake in the company. This is also because the company might most likely not be able to raise its stake in the company.
“Even so, Ant was in the middle of an investment review and it could still decide to shelve a divestment if it failed to get the desired valuation,” Reuters quotes a source as saying.
Ant’s possible exit from Paytm also comes on the heels of the suspension of its mammoth $37 billion stock market listing, touted to be the world’s largest ever.