Softbank exits Paytm in June quarter at loss of $150 million, offloads remaining 1.4% stake

Japan’s Softbank investment arm Softbank Vision Fund exited from fintech major Paytm in the June quarter at a loss of around $150 million, according to news agency PTI. Softbank had invested around $1.5 billion in One 97 Communications — the owner of Paytm brand — in various tranches in 2017.

The investment bank has exited Paytm at a loss of 10-12 per cent in the April-June quarter of fiscal 2024-25 (FY25). Softbank held around 18.5 per cent stake in Paytm before the fintech’s initial public offering (IPO) in 2021.

Also Read: ‘Paytm was like a daughter to me…. who met with an accident,’ Vijay Shekhar Sharma

The bank held a 17.3 per cent stake through SVF India Holdings (Cayman) Ltd and 1.2 per cent through SVF Panther (Cayman) Ltd. SVF Panther sold its entire stake during the IPO for ₹1,689 crore, about $225 million. SVF India Holdings (Cayman) Ltd sold off its remaining 1.4 per cent share in the fintech major.

Softbank announced that it will exit Paytm 24 months after the IPO. The exit was in line with Softbank’s plan. However, sources told PTI that the company did anticipate a loss at that time. Softbank had acquired Paytm shares at an average price of about ₹800 apiece.

Ace investor Warren Buffet’s Berkshire Hathaway Inc had also exited Paytm by selling shares at a lower-than-acquired price. The firm had acquired 2.6 per cent stake in Paytm for ₹1,279.7 per share at an aggregate value of ₹2,179 crore, as per an official document. The shares were disposed of at an average price of ₹877.29 apiece, taking the transaction value to ₹1,370.63 crore in November.

Also Read: Paytm gets a third-party license from NPCI. What does this mean for you?

Paytm Q4 Results

Paytm share price was listed at ₹1,955, lower by nine per cent, and has not matched its issue price of ₹2,150 apiece to date. Paytm stock crashed most after the Reserve Bank of India (RBI) banned its associate firm Paytm Payments Bank Ltd from carrying out transactions. It touched an all-time low of ₹310 on May 9.

Paytm reported a widening of losses to ₹550 crore in the fourth quarter of 2023-24 (Q4FY24) following the ban on transactions related to its payments bank. Paytm wrote off ₹227 crore investment for a 39 per cent stake in PPBL following future uncertainties associated with its business operations, including the uncertainty of any other regulatory development, etc.

For the year ended March 31, 2024, the fintech’s loss narrowed to ₹1,422.4 crore. Paytm had recorded a loss of ₹1,776.5 crore in FY23. On Friday, July 12, shares of Paytm settled 2.47 per cent lower at ₹at ₹467.25 apiece on the BSE.

Technical View

Earlier this month, domestic brokerage firm StoxBox said the Paytm stock had shown potential trend reversal patterns, making it a compelling buy at current levels. According to Stoxbox, Paytm’s wide reach enables it to generate revenue from merchants and consumers and allows cross-selling opportunities.

The brokerage believes constant improvement in operating leverage will continue to drive profitability. “Paytm expects to achieve breakeven in EBITDA FY25 and is ahead of its guidance. However, due to temporary disruption in operating metrics, there will be an incremental EBITDA impact of ₹100 crore – ₹150 crore in Q1FY25. The company is confident of improvement from Q2FY25, as it restarted certain paused products and achieved steady growth in operating metrics,” said StoxBox.

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.