VSS buying sizeable chunk from Antfin. Don’t jump.

Paytm has informed that it’s Founder MD & CEO, Vijay Shekhar Sharma (VSS) is acquiring 10.30% stake from Antfin.

  • Stake is being acquired through a 100% foreign entity owned by VSS – Resilient Asset Management B.V.
  • In lieu of the acquisition, Resilient is issuing Optionally Convertible Debentures (OCDs) to Antfin
  • Post transaction –
    • VSS’s shareholding in Paytm (direct and indirect) will increase to 19.42%; and
    • Antfin’s shareholding will reduce to 13.5%

Not too many details are available on the structure of the said transaction.

However, based on what has been disclosed, as the structure is OCD, Antfin very likely is retaining the upside whereas VSS will need to fund the downside and redeem the OCDs, if Antfin chooses so.

The structure does seem to suggest that the transaction may be due to some previous arrangement between Antfin and VSS.

To me there is no real reason for anyone to get excited – though Bulls may see this transaction as mitigation of risk of Antfin looking to sell in the near future. Also many might argue that reduction in Antfin’s shareholding (being Chinese) might be looked positively by the regulators.

In my view, nothing of above really holds true –

  • Even after this transaction, almost 70% is held by the institutions. If not Antfin, someone else may look to exit and hence the continued selling pressure.
  • The structure is OCD and hence Antfin has really not sold off. It can convert and become the shareholder again.
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