Alibaba’s Ant may sell Paytm share amid Indo-China tensions

By Rahul Vaimal, Associate Editor
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The world’s highest-valued fintech company Ant Group is reportedly stepping back from its 30 percent share in Indian eCommerce payment system Paytm due to the tensions between India and China.

Financial details of the possible sale has not been affirmed yet as the eCommerce giant, Alibaba backed unicorn company, Ant Group has not issued any formal transaction process, according to sources related to the matter.

Both Ant and Paytm declined the information. A spokesman to the Indian digital payment platform said that “there has been no discussion with any of our major shareholders ever, nor any plans, about selling their stake.”

Paytm, which is financed by SoftBank Group, was valued at around $16 billion during its last private fundraising round a year ago and in that valuation, Ant’s share in the firm was about $4.8 billion.

If the Chinese fintech behemoth exits from Paytm, it would mark another turnaround for Ant after the dramatic pause of its $37 billion IPO last month, which would have been the world’s biggest. It also would shake Ant Group’s ambition to become a global payments leader.

The intensifying diplomatic tensions between India and China are the main reason for Ant to consider the sale of its share in Paytm, according to people closer to the matter.

Due to the worsening relations, India has also put restrictions on investments from China and banned several Chinese mobile applications, including those from tech giants Tencent, Alibaba and ByteDance.

“There is a growing realization within Ant management that it would not be able to raise its stake in the company,” one of the people with direct knowledge said.

Even so, Ant was considering to review its investment in the Indian firm and it could still go with a divestment if it failed to get the expected valuation, sources said. There are also chances for the fintech company to end up retaining the small stake in Paytm.

Competitive intensity

Over the past years, Indian start-ups have been receiving huge financial backing from Chinese investors like Alibaba and Tencent. Earlier, bankers have stated that they were planning to strengthen their presence in the country intending to expand their revenue outside China.

The eCommerce giant Alibaba has already invested more than $4 billion in the Indian market and had plans to invest around $5 billion by 2021, which has now been paused.

Ant Group’s first investment in Paytm was in 2015 and it owns a 30 percent share in the firm through its parent company, One97 Communications, according to Ant’s IPO prospectus, which described the Indian firm as a major associate.

Besides the tighter investment rules for Chinese companies in India, tougher competition is also a factor for Ant’s divestment plan in Paytm as it is losing dominance in the market.

Online transactions, lending and e-wallet services have been growing rapidly in India, led by a government push to make the country adopt digital payments, which ended up in new entry and expansion of payment services like Facebook-owned WhatsApp, Alphabet Inc’s Google Pay and Walmart’s PhonePe.