An early closure of the Paytm-Raheja QBE deal that was announced nearly a year ago is crucial for the
Paytm IPO slated for November this year.
The current proposal to lend up to Rs 740 crore, or around $100 million, to two of Sharma’s companies where he is a director—VSS Holdings and VSS Investco—is expected to help seal the deal sooner, said the people cited above. “The nearly $100 million debt will provide liquidity to Sharma to actually pay for the acquisition,” said one person in the know of the matter.
‘Multiple Restructuring Options’
“They (Paytm and its founder) are also exploring multiple restructuring options to stitch up this deal so it can get IRDA approval sooner,” said the person cited earlier.
“The full loan is for the insurance deal,” another person added.
Paytm declined to comment. An email sent to Raheja QBE did not elicit any response.
Paytm shareholders, who were informed about the loan proposal on June 5, will vote on it during the annual general meeting (AGM) on June 30. The AGM notice did not specify the purpose for which the capital was being loaned to Sharma.
Business daily Mint was the first to report the loan proposal in the AGM notice.
The Paytm-Raheja QBE deal, which is awaiting regulatory approval by the Insurance Regulatory and Development Authority of India (IRDA), will be routed through Paytm subsidiary QorQl—a joint venture of Sharma (51%) and One97 Communications (49%).
A part of the loan will also be used in the insurance business, sources added.
Regulators are closely scrutinising the ownership structure of Indian entities in banking and financial services, given recent geopolitical developments, people said.
Sharma owns close to 15% in One97, according to its
latest annual report for FY21. In 2016, he sold around 1% of his holding in One97 Communications to finance his holding in Paytm Payments Bank. Sharma is the majority shareholder of the payments bank, with 51% stake —necessary for regulatory clearance—while the rest is owned by One97 and its units.
According to the details in the AGM notice, a copy of which has been reviewed by ET, Paytm will offer an inter-corporate deposit/loan of close to $34 million to VSS Investco in one or more tranches. Sharma will have to pay this back in 12 months or before the IPO, and the interest rate for this loan is 15%.
“Vijay Shekhar Sharma to raise external funding or sell his shares in the company for repayment of the loan borrowed from the company,” the notice said.
The other company involved is VSS Holdco. Paytm will subscribe to optionally convertible debentures of VSS Holdco worth over $66 million, of 10 years tenure at an interest rate of 15%. Paytm will end up owing 96% in this firm when the debentures are converted into shares.
Paytm IPO Plans
For Paytm, this major pivot to a full-fledged financial services provider, from being a digital wallet firm, will be critical to its
ambitions for a public listing. Insurance is one of the big bets for Paytm as it looks to scale its financial services portfolio. The company needs to close the pending deals and secure all clearances before the November initial public offer (IPO).
ET reported on June 8 that Paytm’s parent firm has told its shareholders
it is contemplating a mix of fresh issuance of shares along with an offer for sale for shareholders in the proposed IPO. This was the first time the company officially spoke of its IPO plan.
ET last week
reported that Paytm clocked Rs 2,802 crore in consolidated revenue from operations for the FY21, a drop of 14% year-on-year. Its losses went down to Rs 1,701 crore, from Rs 2,942 crore, a significant drop of 42%. The audited financial figures are yet to be filed with the Registrar of Companies. ET had sourced the annual report independently.