Airtel is engaging with Paytm to explore sale of the Airtel Payments Bank business in exchange for shares in the financial services firm, according to two people familiar with the matter, in a move that can be seen as the telecom giant conceding the payments market to the younger firm. If the deal materializes, the second largest Indian wireless operator also plans to make an additional investment in Paytm, one of the people said.
The two firms have not yet reached a deal yet, and both maintain some reservations, according to one of the people. Airtel did not respond to a request for comment Friday afternoon. Paytm denied that it was involved in any such discussions. The deliberations have reached a stage where bankers are involved, according to two people familiar with the matter.
In a statement, a Paytm spokesperson said, “While we don’t typically comment on market speculation, we can confirm that we remain fully focused on our strong organic growth journey and are not involved in any such discussions.”
Airtel has been engaging with Paytm for several years for potentially offloading the telecom giant’s payments bank business, according to a source familiar with the matter. But Paytm sees a major overlap in its payments bank customers and those of Airtel’s, the source said.
But the current climate has made a deal somewhat more enticing for the two firms. Shares of Paytm, which listed in 2021, are down by over 60% since the listing. Paytm, once India’s most valuable startup, was among half a dozen consumer tech startups that went public in the past two years. But all the firms in the group, including Zomato, Nykaa and PolicyBazaar, have performed poorly in the public markets even as India’s stock benchmark index remains in green.
Paytm, which sought a valuation of over $19 billion in its 2021 listing, currently has a market cap of $4.8 billion. Walmart and General Atlantic-backed fintech startup PhonePe, which currently generates under $400 million in revenue, is valued at $12 billion.
An equity swap deal would add more weight to Paytm’s popularity among investors. Airtel’s payments bank has nearly 130 million customers and is a profitable unit, the company disclosed earlier.
Undeterred by the poor performance in the stock exchanges, Paytm founder and chief executive Vijay Shekhar Sharma has pledged to reach profitability by this year and get to $1 billion in annual revenue by March.
Telecom giant Airtel eyes a stake in Paytm by Manish Singh originally published on TechCrunch