SoftBank Group has officially completed its exit from Paytm by selling the Indian fintech firm's stake in Japan-based PayPay Corporation to a SoftBank Vision Fund 2 entity.
The transaction, valued at $279.2 million, severs both direct and indirect investment ties between SoftBank Group and Paytm.
Earlier, during the January-March quarter of 2024, SoftBank had already sold its direct stake in Paytm, incurring a loss of $544 million. At the time, SoftBank anticipated a more favorable valuation for PayPay, initially estimating it at approximately $7 billion. This would have limited their overall net loss to $100-150 million.
However, the final transaction valued PayPay Corporation at $3.9 billion, marking a sharper-than-expected markdown. While secondary market transactions often occur at a discount, this valuation represented a significantly steeper markdown than the usual 15-20%.
Paytm confirmed the transaction on Saturday, stating that its wholly-owned subsidiary, One97 Communications Singapore Private Limited (Paytm Singapore), sold its 3.95% stake in PayPay Corporation. These Stock Acquisition Rights (SARs), originally acquired in September 2020, were sold at a valuation of JPY 1.06 trillion for PayPay.
Before Paytm’s IPO in 2021, SoftBank held approximately 18.5% of Paytm, split between a 17.3% stake via SVF India Holdings (Cayman) Ltd and 1.2% via SVF Panther (Cayman) Ltd. During the IPO, SVF Panther divested its entire stake, raising ₹1,689 crore (approximately $225 million).
SoftBank had previously announced its intent to fully exit Paytm within 24 months following the regulatory lock-in period.
Paytm’s Stock Performance
SoftBank acquired Paytm shares at an average cost of ₹800 per share. When Paytm was listed at an issue price of ₹2,150 in its November 2021 IPO, the stock debuted at ₹1,955, closing 9% lower than its listing price. The stock has since struggled to regain its IPO valuation.
Paytm's stock performance took a significant hit on January 31, 2024, when the Reserve Bank of India (RBI) imposed restrictions on Paytm Payments Bank Ltd (PPBL), citing regulatory compliance issues. This led to a sharp decline, with the stock hitting a record low of ₹310 on May 9, 2024.
However, the stock has since recovered, surpassing its pre-restriction level of ₹761.20. As of the most recent market close on December 15, 2024, Paytm shares were trading at ₹975.35.
SoftBank's exit from Paytm, combined with the valuation markdown, highlights the significant challenges faced during the investment lifecycle. Despite these setbacks, Paytm's gradual stock recovery underscores improving investor sentiment in the aftermath of regulatory challenges.
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