July 13th 2024.
In the most recent quarter of June, Softbank's investment arm, Softbank Vision Fund, made the decision to exit from Paytm at a loss of approximately $150 million. This may come as a surprise to some, as Softbank had invested a total of $1.5 billion in One97 Communications, the parent company of Paytm, in 2017 through different installments.
According to sources familiar with the situation, Softbank's loss amounts to about 10-12% of their initial investment. One source stated that the total loss was around $150 million. Prior to Paytm's initial public offering in 2021, Softbank held a stake of 18.5% in the company. This was divided between two entities - SVF India Holdings Ltd with 17.3% and SVF Panther Ltd with 1.2%. During the IPO, SVF Panther sold their entire stake for Rs 1,689 crore, which is equivalent to $225 million.
The decision to exit Paytm was not a surprise, as Softbank had previously announced that they would do so within 24 months of the IPO. This was in line with their plan, although they did anticipate a loss at the time. Softbank had acquired Paytm shares at an average price of Rs 800 each. However, when Paytm was listed on the market at Rs 1,955, which is 9% lower than expected, and it has yet to reach its issue price of Rs 2,150.
Paytm's share price continued to decline after the Reserve Bank of India banned its associate firm, Paytm Payments Bank Ltd, from conducting transactions. It reached an all-time low of Rs 310 on May 9. In the fourth quarter of 2023-24, Paytm reported a widening of losses to Rs 550 crore due to the ban on transactions related to its payments bank. During this time, the company also wrote off Rs 227 crore for their 39% stake in PPBL, citing uncertainties in its business operations and potential regulatory developments.
For the fiscal year ended March 31, 2024, Paytm's losses narrowed down to Rs 1,422.4 crore compared to the previous year's loss of Rs 1,776.5 crore. In a move that surprised many, billionaire Warren Buffet's Berkshire Hathaway Inc also exited Paytm by selling their shares at a lower price than what they initially acquired them for. In November, the company had acquired a 2.6% stake in Paytm for Rs 1,279.7 per share, which amounted to Rs 2,179 crore. However, they ended up selling the shares at an average price of Rs 877.29 apiece, resulting in a transaction value of Rs 1,370.63 crore.
As of Friday, Paytm's shares closed at Rs 467.25 apiece. This goes to show that even with high-profile investors, there is no guarantee of success in the ever-changing world of business.
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