Unused corpus of Rs 2000 crore raised may come to Paytm’s rescue
According to sources, Paytm would look at more such acquisitions in the coming days as it looks to defend its core payments business, which is facing the heat of the RBI action on the payments bank entity.
An unused corpus of Rs 2000 crore raised during its IPO to acquire smaller companies may come to Paytm’s rescue, which faces losing a large portion of its revenue and profit in the wake of regulatory clampdown on Paytm Payments Bank. According to sources, in the days following the Reserve Bank of India (RBI) order to shut down the payments bank operations from February 29 due to compliance issues, One97 Communications, its listed parent, has sounded off investment banks to tap opportunities in e-commerce, payments and online marketing domain, a Moneycontrol report stated.
Paytm had raised Rs 8,300 crore in primary capital in its November 2021 IPO, of which the company has used Rs 4,300 crore for organic initiatives to grow its businesses while Rs 1,819.4 crore was used for general corporate purposes, as per a stock exchange filing by the company. However, Rs 2,000 crore raised in the IPO for inorganic initiatives, such as acquisitions, strategic partnerships and investing in new business initiatives, is still lying unused in the bank, as of December 31, 2023. The company did not respond to a query from Moneycontrol in this regard.
According to sources, Paytm would look at more such acquisitions in the coming days as it looks to defend its core payments business, which is facing the heat of the RBI action on the payments bank entity. Reports suggest that following the events of the RBI order, several merchants on the Paytm network have started migrating to other payment service providers amid confusion over the impact of the RBI move on Paytm and its services.
“While so far they have not used this money, given the current situation it is very likely that they will look to deploy some of this cash to make strategic acquisitions that bolster their core business and help to protect their market share,” said a senior banker who refused to be named. “The core payments business is definitely one area but they could also look at acquisitions in their other businesses such as financial services too, which may help blunt the overall impact on the company,” he said. “Such actions could also send a positive signal to the markets that the company is willing to take strong measures to steady the ship,” the banker added.
Paytm has a long track record of acquisitions having acquired several startups over the years to boost its existing businesses or to enter new businesses. Some of its major acquisitions include the acquisition of a majority stake in Little Internet Private Limited, which provides marketing solutions to local merchants, Orbgen Technologies Private Limited, which operates online ticketing platform TicketNew; and Wasteland Entertainment Private Limited through which it integrated events listed on Insider.in with Paytm app.
