(Bloomberg) -- Paytm has won the federal government’s approval to invest in its key payments gateway arm, a sliver of good news for the troubled Indian fintech.
The finance ministry approved Paytm’s investment in Paytm Payments Services Ltd., the fintech said in a public disclosure Wednesday. The investment of less than 1 billion rupees ($11.9 million) allows Paytm to beef up its online transactions processing unit, Bloomberg News reported previously.
Paytm required the finance ministry’s approval for the investment proposed over two years ago as Ant Group Co.’s stake in the company made its outlay in Paytm Payments Services a direct foreign investment. At the time, Ant owned a nearly 25% stake in One97 Communications Ltd., Paytm’s official name, and New Delhi had stepped up scrutiny of investments from China.
Paytm’s billionaire founder Vijay Shekhar Sharma acquired 10.3% stake from Ant last year in a cashless deal that made him the biggest shareholder in One97 with just over 24% equity. The deal likely boosted the government’s confidence in giving Paytm Payments Services clearance for the investment.
The investment is a step toward getting a license as a payments aggregator, which is pending before the Reserve Bank of India since 2022 when it also barred the company from adding new online merchants. A payments aggregator is an entity that makes it easier for online retailers and merchants to accept customers’ digital payments.
On Wednesday, Paytm said PPSL will now re-submit its payments aggregator application. An approval will mean PPSL can make its services available to new merchants.
India’s banking regulator earlier this year ordered Paytm Payments Bank Ltd. — another unit of Sharma’s fintech empire — to stop accepting deposits in its accounts, dealing a massive blow to the billionaire’s ambitions.
Sharma has since worked hard to forge new partnerships with lenders to sustain his digital payments business. He’s also engineered the sale of the company’s movie and events ticketing business to food-delivery firm Zomato Ltd. for 20.5 billion rupees. That deal allows Sharma to sharpen focus on his core payments and financial services’ distribution business such as loans.
©2024 Bloomberg L.P.
