Vijay Shekhar Sharma used his Netherlands-based firm to buy AntFin’s stake in Paytm; all you need to know

Paytm’s Vijay Shekhar Sharma surprised everyone by skilfully buying out Ant’s stake through Resilient Asset Management BV, a foreign entity that he owns. 

However, there is limited public information available about the overseas entity, leaving some questions unanswered. It raises speculation about whether Resilient Asset Management BV was specifically created as a vehicle to hold the Ant stake or if it has business operations in the Netherlands.

The company today announced that the acquisition of a 10.30 per cent stake by Sharma, Founder and CEO of One 97 Communications Limited, in the company is via his 100 per cent owned overseas entity, Resilient Asset Management BV based in the Netherlands. 

According to the deal, Antfin will transfer 653.35 lakh shares of Paytm to Resilient Asset Management BV. Now this company, in turn, will issue optionally convertible debentures (OCDs) to Antfin, which in turn will allow Antfin to retain the economic value of the 10.30 per cent stake. 

While Sharma’s Resilient will acquire ownership, and voting rights, of the 10.30 per cent block, there are two crucial parts to this deal. First, the deal allows Ant Holdings to retain the economic value of the 10.30 per cent stake. The company’s press releases also make it clear that no cash payment will be made for this acquisition, and neither will any pledge, guarantee, or other value assurance be provided by Sharma, directly or otherwise.

Second, the OCDs are instruments for raising capital to meet the long-term funding requirement for expansion and growing the business. There is a fixed interest to be paid, which is not specified in the current deal. 

The amount of OCDs is likely to be $628 million, which is equal to the value of the 10.30 per cent stake. 

There is, however, a catch, as OCDs, as the name suggests, offer the option to Ant Financial, the holder, to convert their debentures into equity shares of the issuing company at a predetermined conversion price and within a specified time frame. The fine print of the agreement is not known. At what price they will be converted into equity if there is no redemption remains unclear.

Currently, Antfin will cease to be the largest shareholder and Sharma returns as largest shareholder of Paytm. 

Sharma’s shareholding in Paytm will increase to 19.42 per cent, whereas Antfin’s shareholding will reduce to 13.5 per cent.