SoftBank Group has officially exited its investment in Indian fintech giant Paytm by selling its stake in Japan-based PayPay Corporation to a SoftBank Vision Fund 2 entity for $279.2 million. This move severs both direct and indirect ties between SoftBank Group and Paytm, marking the culmination of SoftBank's gradual divestment from the company.
In the January-March 2024 quarter, SoftBank had already offloaded its direct stake in Paytm, incurring a $544 million loss. However, the anticipated overall notional loss from the investment was lower than expected, thanks to Paytm's contributions to the establishment of PayPay, SoftBank's Japanese fintech venture.
Valuation Challenges in the Paytm-PayPay Deal
SoftBank initially projected PayPay's valuation at around $7 billion, which would have limited its net loss from the Paytm deal to $100-150 million. However, the transaction valued PayPay at $3.9 billion—a steep markdown compared to the standard 15-20% discount in secondary transactions.
Paytm announced on Saturday that its wholly-owned subsidiary, One97 Communications Singapore Private Limited (Paytm Singapore), sold 3.95% of PayPay Corporation at a valuation of JPY 1.06 trillion. These Stock Acquisition Rights (SARs) were acquired by Paytm in September 2020.
SoftBank's Journey with Paytm
SoftBank held an 18.5% stake in Paytm before its IPO in 2021. This included 17.3% via SVF India Holdings (Cayman) Ltd and 1.2% through SVF Panther (Cayman) Ltd. During the IPO, SVF Panther sold its entire stake, raising Rs 1,689 crore (around $225 million).
SoftBank had acquired Paytm shares at an average cost of Rs 800 per share. Despite an initial listing at Rs 1,955, the stock debuted 9% lower than its issue price of Rs 2,150 and has struggled to regain its peak valuation.
Recovery in Paytm Stock
Paytm's stock faced significant challenges following restrictions imposed by the Reserve Bank of India (RBI) on Paytm Payments Bank Ltd (PPBL). These regulatory actions pushed the share price to a record low of Rs 310 in May 2023.
However, the stock has since staged a recovery, surpassing the Rs 761.20 pre-restriction level. It last traded at Rs 975.35 at market close on Friday, signaling improved investor confidence.
SoftBank’s exit from Paytm marks the end of a significant chapter in the fintech company’s journey. While the Japanese conglomerate faced losses in its Paytm investment, the transaction underscores the complexities of valuing high-growth fintech ventures in fluctuating markets. Meanwhile, Paytm continues to navigate its recovery, showing resilience despite regulatory challenges and market volatility.
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