Chinese FinTech giant Ant Group is considering selling its 30% stake in Indian electronic payment chip Paytm amid tensions between the two Asian neighbours and a toughening competitive landscape, individuals with direct knowledge of the issue said.
Financial details of the potential transaction have not been firmed up and Ant, the Alibaba-backed payments-to-consumer charge behemoth, has not established a formal sale process nonetheless, four people told journalists.
Paytm, which can be backed by SoftBank Group Corp among the others, has been valued at about $16 billion through its newest private fundraising round one year ago. At the valuation, Ant’s stake in the Indian company is worth about $4.8 billion.
Both Ant and Paytm said the data was incorrect.
Ant’s possible exit from Paytm would indicate another change for the Chinese firm hot on the heels of the dramatic suspension of its $37 billion stock listing a month, which would have been the world’s largest.
Additionally, it will be a step back out of the aspirations of being a global payments leader. Sources told journalists at our partner news agency Reuters in October that Ant was cutting its financial support to several of the overseas affiliated e-wallet companies.
The main cause for Ant to take into account the divestment of its stake in Paytm is that the worsening diplomatic relations between India and China in the past few months, said the individuals , who declined to be named since the deliberations are confidential.
Relations between the states are at a nadir, together with troops locked in a border face-off from the western Himalayas for weeks after a struggle in June where 20 Indian soldiers were killed.
Considering that the conflict India has tightened rules for investments from China and banned dozens of Chinese mobile apps, such as from technology giants Tencent, Alibaba and ByteDance. It prohibited 43 more apps late last month.
“There is a growing realisation within Ant management that it would not be able to raise its stake in the company,” one of those individuals with direct knowledge mentioned, adding senior managers in Ant have discussed the notion lately.
Nevertheless, Ant was in the center of a investment review and it could still opt to shelve a divestment when it failed to find the desired valuation, he said.
Two other sources said that as a result of the review Ant could wind up keeping a small stake in Paytm.
Indian start-ups are heavily financed by Chinese investors like Alibaba and Tencent. Bankers have said they were seeking to bolster their presence in the nation with a goal to cultivate their revenue outside China.
Alibaba has spent over $4 billion in India so much and had plans to spend around $5 billion in 2021, that have been put on hold, one of the sources said.
Ant first spent in Paytm in 2015 and owns its 30% stake in the firm via its parent firm, One97 Communications, based on Ant’s initial public offering prospectus, which described the Indian company as a significant associate.
Along with the tighter investment rules for Chinese firms in India, tougher competition is probably another factor supporting Ant’s calculations regarding Paytm, that is losing its dominance, two of those folks said.
Online transactions, lending and e-wallet services have been growing rapidly in India, led by a government force to earn the country’s cash-loving retailers and consumers adopt digital payments.
That has led to the entry and growth of Facebook-owned WhatsApp, Alphabet’s Google Pay, and Walmart’s PhonePe. Some national players can also be expanding operations.
The team at Platform Executive hope you have enjoyed the ‘Ant considers Paytm stake sale amid tensions with India‘ article. Initial reporting via our official content partners at Thomson Reuters. Reporting by Sumeet Chatterjee in Hong Kong, Aditi Shah and Sankalp Phartiyal in New Delhi, Anirban Sen in Bengaluru, Keith Zhai in Singapore. Editing by Stephen Coates.
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