Digital payments major Paytm is reportedly in talks to pick up stake in private sector lender YES Bank. One97 Communications, the group that owns Paytm, may buy the stake from Rana Kapoor, co-founder of YES Bank.
It may be recalled that YES Bank was under Reserve Bank of India’s scanner for its corporate governance practices and the under-reporting of bad loans. The central bank last Novermber denied Kapoor an extension to continue as managing director and CEO. Ravneet Gill was appointed MD and CEO of YES Bank from March 2019.
Kapoor and his associate entities owned 10.6% in the bank at the end of June 2019. Around 7.34% of the Kapoor family stake has been pledged with Reliance Nippon Asset Management Company.
One97 Communications founder Vijay Shekhar Sharma had held preliminary talks with Kapoor, Business Standard reports. The structure of the deal would depend on approval from the Reserve Bank of India, given that Sharma already owns a stake in Paytm Payments Bank, the daily added.
Reliance Nippon Life Asset Management has said it has not given any consent and is not in discussion with anyone about YES Bank’s pledged shares.
Founded in 2010 as a prepaid mobile and direct-to-home recharge platform, Paytm has now extended its services to areas such as payments bank, insurance, insurance broking, travel ticketing, and mobile wallet services. By March 2018 its merchant base was more than seven million.
When the Narendra Modi Government banned high-value currency notes in November 2016, that led to a spike in usage of cashless alternatives, including mobile wallets, which benefitted Paytm.
It also attracted funding from prominent venture capitalists such as Alibaba’s Ant Financial and SoftBank’s Vision Fund, and the company is currently valued at around US$ 15 billion.
However, of late, it has been facing stiff competition from Google Pay and Walmart’s PhonePe and that is taking a toll on Paytm’s finances. In the fiscal year that ended March 2019, Paytm’s parent One97 Communications Ltd had nearly tripled its losses.
On a consolidated basis, the company’s loss widened to 42.17 billion rupees ($588 million), as against 16.04 billion rupees ($224 million) in the year-ago period, as per the annual report it supplied to its shareholders, Times of India reports. The company is yet to file a copy of the same at the Ministry of Corporate Affairs.
The company’s expenses nearly doubled to 77.30 billion rupees ($1.08 billion) during the period, from 48.64 billion rupees ($679 million) in the previous year as it carried out various capital and operational expenditures to strengthen its brand.