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Paytm founder Vijay Shekhar Sharma buying 10.30% stake in the company from Antfin resulted in a Chinese entity ceasing to be largest shareholder in the company, which analysts believe to be positive for Paytm’s fundamentals and also remove overhang on the stock.
Paytm founder Vijay Shekhar Sharma buying 10.30% stake in the company from Antfin resulted in a Chinese entity ceasing to be largest shareholder in the company, which analysts believe to be positive for Paytm’s fundamentals and also remove overhang on the stock.
On Monday, Paytm announced that Sharma entered into an agreement to purchase a 10.30% stake in the company from Antfin (Netherlands) Holding BV. Antfin will transfer 6.53 crore shares of Paytm to Resilient Asset Management B.V., an entity in which Sharma owns the complete 100% stake.
On Monday, Paytm announced that Sharma entered into an agreement to purchase a 10.30% stake in the company from Antfin (Netherlands) Holding BV. Antfin will transfer 6.53 crore shares of Paytm to Resilient Asset Management B.V., an entity in which Sharma owns the complete 100% stake.
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With this, Vijay Shekhar Sharma will increase his holding in Paytm to 19.42%, becoming the largest shareholder in the fintech giant, while the stake of Antfin, an affiliate of China’s Ant Group Co, will drop to 13.5%.
Analysts at BofA Securities noted that a Chinese shareholder ceasing to be the largest shareholder, would also directionally be positive for the company fundamentals.
“We consider this announcement to be positive as it removes overhang on the stock from the risk that Antfin in future may look to reduce its stake leading to more supply. Furthermore, Sharma buying the stake at Friday’s close indicates his confidence in the story with a “skin in the game” approach,” BofA said in a report.
This event also reduces risk that some other strategic investor coming who would have a major stake similar to that of Sharma, it added.
Moreover, analysts believe a Chinese shareholder (Antfin) ceasing to be the largest shareholder, would also directionally be positive for the company fundamentals.
The Reserve Bank of India (RBI), in November 2022, had declined Paytm Payments Services Ltd’s (PPSL) application to operate as a payment aggregator and it gave it 120 days to reapply for the license.
Until it gets an approval, the company, which is a wholly owned subsidiary of Paytm, has been asked to not onboard new online merchants.
BofA noted that this was to give PPSL time to comply with foreign direct investment (FDI) guidelines and now, the brokerage does not expect such concerns going ahead.
BofA maintained Buy on Paytm on favorable risk-reward and has a target price of ₹1,020 per share.
In June 2023, BofA Securities had reiterated its ‘Buy’ rating on One 97 Communications, the parent company of Paytm, and increased its price target to ₹1,020 from ₹885 earlier.
The brokerage expects Paytm’s momentum in high margin lending and Soundbox business to remain good for at least next 3-4 quarters and sees upside risks to consensus estimates.
In another development, Price Waterhouse on Monday resigned as the auditor of Paytm Payments Services Ltd, the wholly-owned subsidiary of One97 Communications. The company informed the exchanges it has appointed S.R. Batliboi & Associates as its auditor.
Paytm share price has jumped more than 57% in 2023 so far as analysts raised their bullish calls on the stock amid improving operating metrics of the company.
On Monday, Paytm share price witnessed a sharp rally of nearly 7% after the announcement of Sharma increasing his shareholding in the company. However, on Tuesday, Paytm shares succumbed to profit booking.
At 11:35 am, Paytm shares were trading 2.67% lower at ₹828.00 apiece on the BSE.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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