SoftBank Acquires Paytm’s SARs in PayPay for $279 Million
- ByStartupStory | December 7, 2024
Fintech giant Paytm, through its subsidiary One97 Communications Singapore, has sold its stock acquisition rights (SARs) in Japanese digital payments firm PayPay Corporation to SoftBank Vision Fund 2 for ₹2,364 crore ($279.19 million). The deal, expected to conclude this month, values PayPay at $7.06 billion, according to an exchange filing by Paytm.
The board of Paytm’s Singapore subsidiary approved the transaction, citing the significant value created for the company. The sale will bolster Paytm’s cash reserves by ₹2,364 crore, which the company plans to use to drive future business initiatives.
“We remain fully committed and will continue to support PayPay’s product and technology innovations in future. We are working on introducing new AI-powered features to accelerate PayPay’s vision in Japan,” a Paytm spokesperson stated.
Sale Exceeds Initial Estimates
The stake sale price is approximately 12% higher than the $250 million figure previously estimated in reports. Hours after the initial news broke, Paytm clarified in a filing that the Singapore subsidiary’s board had indeed approved the sale of SARs in PayPay Corporation.
What Are SARs?
Stock acquisition rights (SARs) are options or warrants that provide holders with the right to sell securities in the issuing company. Typically issued as part of equity-based compensation plans, SARs have enabled Paytm to benefit significantly from its early involvement in PayPay.
PayPay, founded in 2018 through a collaboration between SoftBank, Yahoo Japan, and Paytm, offers smartphone payment services using barcodes (QR codes) similar to Paytm. Based in Tokyo, the company boasts a user base of 65 million. As of March 31, 2021, Paytm held SARs representing a 7.2% equity stake in PayPay.
Paytm’s Strategic Moves
This transaction marks the second significant cash boost for Paytm this fiscal year. In August, the company sold its events and ticketing platform, Paytm Insider, to Zomato for ₹2,048 crore ($241.8 million).
As of the second quarter of FY25, Paytm’s cash reserves stood at ₹9,999 crore, reflecting a 23% increase from ₹8,108 crore at the end of the June quarter.
Focus on Consumer Payments Business
Paytm founder and CEO Vijay Shekhar Sharma has reiterated his focus on expanding the company’s core consumer payments business. In October, Sharma emphasized the company’s intent to reinvest in this area, although specific investment plans remain unclear.
Recently, Paytm introduced new features such as UPI Lite Auto Top-Ups, UPI International for select overseas markets, and a UPI statement download option.
Market Performance
Following the announcement, Paytm’s shares ended yesterday’s trading session 2.02% higher at ₹975.80. The sale of SARs and other strategic initiatives reflect Paytm’s commitment to enhancing its cash position and driving innovation in its core business areas.
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