China’s Ant Group may sell 30% stake in Paytm amid tensions with India: Report

Chinese fintech firm Ant Group may sell 30 per cent stake in Indian digital payment firm Paytm as tensions prevail between the two Asian neighbours. While Ant Group, the Alibaba-backed payments-to-consumer credit giant, has not yet launched a formal sale process yet, people in the knowhow have confirmed the possibility to news agency Reuters.

Paytm, which is backed by SoftBank Group Corp among other investors, was valued at approximately $16 billion after its latest private fundraising round, which was completed a year ago. Considering that valuation, Ant Group’s stake in Paytm comes to about $4.8 billion.

The development has been denied by both Paytm and Ant Group. A Paytm spokesperson told the news agency that there has been no discussion with any of their major shareholders about a stake sale.

India-China tension

The report comes at a time when India has been cracking down on Chinese investments in the country on the back of border tensions in Eastern Ladakh region. India has banned a plethora of Chinese applications including those from tech giants Tencent, Alibaba and ByteDance; 43 more applications were banned last month by India.

It is worth mentioning that New Delhi has also tightened FDI rules to prevent “opportunistic takeovers”. The move had upset China which said India’s revised FDI norms violate WTO’s “principle of non-discrimination”.

If Ant decides to go ahead with the stake sell in Paytm, it would mark another reversal for the Chinese company that has been recently hit by a dramatic suspension of its massive IPO, pegged at $37 billion. It would have been the world’s largest IPO.

Sources had earlier confirmed to Reuters in October that Ant Group was cutting its financial support to many of the overseas affiliated e-wallet firms.

People aware of the development also told the news agency that the main reason behind considering a stake sale in Paytm could be due to worsening diplomatic relations between India and China in the past few months.

One person with direct knowledge of the matter told Reuters that Ant’s management may be realising that it would not be able to raise its stake in the company. The source also told that senior managers at Ant have already discussed the idea recently.

It is no secret the Indian startups are heavily funder by Chinese investors such as Alibaba and Tencent. Alibaba has invested over $4 billion in India so afar and had plans to invest around $5 billion in 2021, but the plans have been put n hold, according to one of the sources quoted by Reuters. Alibaba has not commented on the same.

Ant Group had first invested in Paytm in 2015 and owns 30 per cent stake in the firm through its parent company, One97 Communications. While Ant’s IPO prospectus described the Indian firm as a major associate, there are a few reasons that have raised the possibility of the stake sale.

One of the reasons is tighter investment rules for Chinese firms in India and the second one is tougher competition. With more digital payment services gaining prominence in India, Paytm does not enjoy as big a share of customers as it used to a few years ago.

Since online transactions and e-wallet services are growing rapidly in India, many such as Google Pay, PhonePe and even WhatsApp has entered the space and are competing directly with Paytm.

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