Paytm sees new FPIs ramp up investment, domestic investors hike stakes by 1.68%

Domestic retail investors have hiked their stakes in Paytm by 1.68 percent, while new foreign portfolio investors, including New York-based Tiger Pacific Capital, Societe Generale, France’s third-largest listed bank, and Norway’s Government Pension Fund Global make an entry.

As per the latest shareholding pattern for the quarter ended March 2024, retail investors held 14.53 percent stake in Paytm, a jump from 12.85 percent previously, as mutual funds (MFs) boosted their holdings further.

MFs held 6.15 percent in Paytm for the three months ended March 31, from 4.99 percent in the previous quarter, the filings showed.

This includes Mirae Asset Mutual Fund, which raised stake to 3.76 percent from 2.51 percent in the December quarter, and Nippon India Mutual Fund at 1.66 percent.

As a result, the total stake held by domestic institutional investors, including alternate investment funds and insurance companies, recorded an increase of 0.8 percent to 4,35,68,764 shares.

Provident funds or pension funds which previously held 0.05 percent stake now seem to have taken an exit while non-resident Indians (NRIs) brought some additional shares with 0.85 percent holding in the said quarter.

The increased interest from domestic institutions comes even as the shares of One 97 Communications (Paytm) continue to fall since the RBI’s ban was announced on its banking partner entity--Paytm Payment Bank Limited (PPBL)-- on the evening of January 31.

Paytm's shares have been down nearly 50 percent since the order, driving the market cap down to Rs 25,600 crore.

Foreign portfolio drops, global funds make entry

Foreign institutions now hold 60.40 percent in the fintech firm, a drop from 63.72 earlier, following a decline in foreign direct investment (FDI) in Paytm, even as Foreign Portfolio Investors (FPIs) Category 1 and 2 raised their stakes by more than 15 million shares.

Softbank (SVF India Holdings (Cayman) Limited) further reduced its exposure to 1.40 percent stake in Q4FY24 while others, including Jack Ma-founded Antifin, Resilient Asset Management, and Saif Partners continued with almost same shares.

In the FPI category, Paytm’s previous foreign institutional investors—BNP Paribas Arbitrage and Canada Pension Plan Investment Board — took an exit with entry of new investors.

New York and Hong Kong-based Tiger Pacific Master Fund made an entry in the quarter with 65,79,135 shares at 1.04 percent stake.

Tiger Capital was founded by Run Ye, Junji Takegami and Hoyon Hwang, who previously worked for now-closed Tiger Asia Management. The venture firm recently invested $25 million (Rs 207 crore) in B9 Beverages, maker of Bira 91 beer and owner of pub chain The Beer Café.

This was followed by Goldman Sachs (Singapore) Pte with 84,01,067 shares (1.32 percent holding), France’s third largest listed bank--Societe Generale--with 89,01,090 shares (1.40 percent), Morgan Stanley Asia (Singapore) Pte with 100,95,350 shares (1.59 percent), under the ODI route.

Norway’s Government Pension Fund Global, one of the world’s largest, now has 1.34 percent holding with 85,03,220 shares in Paytm.

Overall, the total FPI shareholding increased by 2 percent at 20.64 percent.

Q4 results anticipation 

Yet to file its Q4 results, analysts remain watchful on the ongoing business transition at Paytm and its ability to recover lost business and resume growth trajectory over FY25.

On Tuesday, Bank of America (BofA) resumed its coverage on One 97 Communications assigning an 'Underperform' rating to Paytm and has set a target price of Rs 400.

Estimating a weak set of numbers for Q4, the global brokerage firm said Paytm is expected to witness a gradual growth in its lending business while the earnings recovery and re-rating could be 2- 3 quarters away.

The combination of lower revenue growth and margins would push back net income breakeven, the US brokerage said, expecting Paytm to achieve Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) breakeven in FY27 and net income break- even in FY28.

Motilal Oswal Financial Services, however, said that Paytm’s FY25 revenue is expected to decline by 24 percent.