Chinese fintech giant Ant Group is considering selling its 30% stake in digital payment processor Paytm amid tensions between the two neighbors and a toughening competitive landscape, people with direct knowledge of the matter said.
Paytm, which is also backed by SoftBank Group Corp among others, was valued at about $16 billion during its latest private fundraising round a year ago. At that valuation, Ant’s stake in the Indian firm is worth about $4.8 billion.
Both Ant and Paytm said that the information was incorrect. A Paytm spokesman said “there has been no discussion with any of our major shareholders ever, or any plans, about selling their stake.”
Ant’s possible exit from Paytm would mark another reversal for the Chinese company hot on the heels of the dramatic suspension of its $37 billion stock listing last month, which would have been the world’s largest.
The main trigger for Ant to consider the divestment of its stake in Paytm is the worsening diplomatic relations between India and China in the past few months, said the people, who declined to be named as the deliberations are confidential.
Since the clash India has tightened rules for investments from China and banned dozens of Chinese mobile apps, including from tech giants Tencent, Alibaba and ByteDance. It banned 43 more apps late last month.
“There is a growing realization within Ant management that it would not be able to raise its stake in the company,” one of the people with direct knowledge said, adding senior managers at Ant have discussed the idea recently.
Even so, Ant was in the middle of an investment review and it could still decide to shelve a divestment if it failed to get the desired valuation, he said.
Two other sources said that as a result of the review Ant could end up retaining a small stake in Paytm.
In addition to the tighter investment rules for Chinese companies in India, tougher competition is likely another factor behind Ant’s calculations regarding Paytm, which is losing its dominance, two of the people said.
Online transactions, lending and e-wallet services have been growing rapidly in India, led by a government push to make the country’s cash-loving merchants and consumers adopt digital payments.
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