Even as Paytm’s stock has been cratering at the stock markets, the shares of a rival are moving in the opposite direction.
Jio Financial Services’s stock has jumped 16% after reports that the company could acquire Paytm’s wallet business. Hindu Businessline reported that Paytm was looking to sell its wallet business, and HDFC Bank and Jio Financial Services were forerunners to acquire it. This caused Jio Financial Services’ stock to spike in trade today. In contrast, Paytm’s stock fell 10%, ending the third consecutive trading day locked in the lower circuit.
Paytm’s wallet business is housed under Paytm Payments Bank, which has been directed by the RBI to stop accepting any deposits after 29th February. Paytm hasn’t approached buyers only after this directive — sources told Businessline that Paytm had been in talks with Jio Financial services for a deal since November last year. “With KYC related issues compounding for Paytm, they’ve not been as aggressive with the business as they were prior to 2022 in the wallets business and if valuations on the table were decent, the talks would with Jio would have fructified much earlier,” said one of the bankers. Paytm Payments Bank hasn’t been allowed to add new customers since March 2022.
But with the RBI now imposing fresh curbs on Paytm Payments Bank, Paytm might be forced to sell its wallet business. “You could call it a distress sale. In such a situation, valuation is the last thing that Paytm can hold on to,” another source said.
Paytm, however, is reportedly more keen to finalize a deal with HDFC Bank. Both Jio and HDFC Bank could use Paytm’s massive wallet business within their own operations. Paytm has 330 million wallet accounts, and has 24 million transactions per month. In comparison, HDFC Bank’s PayZapp wallet has only 14 million wallet accounts. Data for Jio’s wallet isn’t immediately available, but the wallet has largely failed to make a splash in India’s competitive payments space.
Jio, though, has a history of acquiring Indian startups, often at distressed valuations. In the past, it has acquired startups including NowFloats, Haptik and Fynd, and even bigger names like Justdial, and merged with Saavn to form JioSaavn. Paytm is one of India’s largest wallet companies, and could help Jio take its fintech offerings to India’s masses.
And Paytm could be forced to make a sale, much against its wishes. Its back is against the wall — there are rumours that its banking license could be suspended altogether, and its stock has crashed 43 percent over the last 3 trading days. At this point, Jio might just swoop in and help itself to a business that Paytm had taken nearly a decade to build.