📷 Image Credits: Mint
Softbank, the investment arm of Japan’s Softbank Vision Fund, has exited from fintech major Paytm in the June quarter at a loss of around $150 million. The company had invested approximately $1.5 billion in One 97 Communications, the owner of the Paytm brand, in various tranches back in 2017. Prior to Paytm’s IPO in 2021, Softbank held an 18.5% stake in the company. This stake was divided between 17.3% held through SVF India Holdings (Cayman) Ltd and 1.2% held through SVF Panther (Cayman) Ltd. During the IPO, SVF Panther sold its entire stake for approximately $225 million, while SVF India Holdings (Cayman) Ltd offloaded its remaining 1.4% share in the fintech major.
Interestingly, Softbank had announced its intention to exit Paytm 24 months after the IPO, as part of its strategic plan. However, sources close to the matter revealed that the company did anticipate a loss at the time of the exit. Softbank had initially acquired Paytm shares at an average price of about ₹800 apiece. Notably, Warren Buffet’s Berkshire Hathaway Inc also exited Paytm by selling shares at a lower price than initially acquired. The shares were disposed of at an average price of ₹877.29 apiece, resulting in a transaction value of ₹1,370.63 crore.
Following the exit, Paytm’s share price was listed at ₹1,955 but remained lower by nine percent and has not yet reached its issue price of ₹2,150 apiece. The stock faced a significant decline after the RBI banned its associate firm Paytm Payments Bank Ltd from conducting transactions, hitting an all-time low of ₹310 on May 9. The company reported a widening of losses to ₹550 crore in the fourth quarter of 2023-24 due to the ban on transactions related to its payments bank. Despite this, Paytm has shown potential trend reversal patterns, prompting some analysts to view it as a compelling buy at current levels.
Looking towards the future, Paytm is optimistic about achieving breakeven in EBITDA FY25 and has already made progress towards this goal. Although it faced temporary disruption in operating metrics resulting in an additional EBITDA impact of ₹100-150 crore in Q1FY25, the company is confident of improvement in Q2FY25. StoxBox, a domestic brokerage firm, highlighted that Paytm’s wide reach enables revenue generation from merchants and consumers, offering cross-selling opportunities and constant improvement in operating leverage to enhance profitability for the company.
