Paytm has received federal government approval to invest in its core payments gateway arm, offering a positive development for the beleaguered Indian fintech company.
The finance ministry approved Paytm’s investment in Paytm Payments Services Ltd. (PPSL), the company announced in a public disclosure.
While Paytm did not disclose details of the approved investment, a report from Reuters in July, citing a senior finance ministry official, indicated that Paytm had secured approval for a 500 million rupee (about $6 million) investment in its payments division.
The approval was required due to Ant Group Co.’s nearly 25% stake in One97 Communications Ltd., Paytm’s parent company, which categorized the proposed investment as a direct foreign investment.
Amid heightened scrutiny of Chinese investments, Paytm’s billionaire founder Vijay Shekhar Sharma acquired a 10.3% stake from Ant last year, increasing his shareholding to just over 24% and becoming the largest shareholder in One97.
The investment brings Paytm a step closer to securing a payments aggregator license, a status that allows entities to offer digital payments for online retailers and merchants. Paytm’s application for this license has been pending with the Reserve Bank of India since 2022 when the company was also barred from onboarding new online merchants.
Following the latest government approval, Paytm announced that PPSL would re-submit its application for the payments aggregator license. If granted, the license will enable PPSL to offer its services to new merchants, expanding its business reach.
Earlier this year, the Reserve Bank of India ordered Paytm Payments Bank Ltd., another unit of Sharma’s fintech enterprise, to cease accepting new deposits. This directive impacted Sharma’s ambitions in the digital payments space. In response, Sharma has sought to form new partnerships with financial institutions to maintain his digital payments operations.
Additionally, Sharma orchestrated the sale of the company’s movie and events ticketing business to Zomato Ltd. for 20.5 billion rupees, allowing him to concentrate on Paytm’s core payments and financial services distribution business, including loans.
Paytm Payment Services remains one of the core components of the company’s business, accounting for a quarter of its consolidated revenue in the financial year ending March 2023. In July, Vivek Joshi, India’s financial services secretary, stated that Paytm could approach the central bank to seek a payment aggregator license, which would be subject to the bank’s evaluation.
