China’s Ant Group, which owns the widely used Alipay payments app, is looking at selling its 30 percent stake in India’s Paytm as friction between the two countries grows, sources told Reuters.
However, the news service said no formal sale process has begun, and both Ant and Paytm denied that such a move is underway. A Paytm spokesman told Reuters that “there has been no discussion with any of our major shareholders ever, nor any plans, about selling their stake.”
Like Alipay, Paytm is a digital payments platform. Reuters said Paytm, which is partly backed by Japan’s SoftBank Group Corp., was valued at about $16 billion one year ago in a fundraising round. That would make Ant’s stake in the Indian firm worth about $4.8 billion.
Word of a possible sale comes as diplomatic relations between China and neighboring countries have slumped following a June border clash in the Himalayas that saw 20 Indian soldiers killed.
India has responded by tightening investment rules for Chinese companies wishing to participate in the Indian market, which Reuters reported many Chinese firms have become involved in to expand their revenues beyond just Chinese sources. However, New Delhi has recently banned popular Chinese mobile apps from Tencent, Alibaba and TikTok parent ByteDance from the Indian market.
The possible Paytm divestment is just the latest setback for Ant Group, which recently saw the abrupt cancellation of its planned initial public offering of stock.
The Shanghai Stock Exchange delayed Ant Group’s attempt at a record record-setting IPO after controlling shareholder Jack Ma’s clash with Chinese regulators. Several regulatory agencies — the People’s Bank of China (PBOC), the Insurance Regulatory Commission, the Securities Regulatory Commission and the State Administration of Foreign Exchange — had summoned Ma to answer questions after he made comments viewed as critical of Chinese regulators.
The IPO suspension reportedly came from the top down, potentially meaning that orders came from Chinese President Xi Jinping himself. An arduous regulatory process could be in the offing, particularly as the country looks at the upstart FinTech sector.
Howard Yu, director of IMD’s signature Advanced Management Program (AMP), told PYMNTS recently that a restructuring could be on the horizon for Ant Group.
Yu said Ant’s business model shows some level of fundamental risk, especially with its outsized presence in consumer loans and extension of credit to the unbanked population.
“Any FinTech disruptor, when it becomes so big, represents systemic risk,” he said.
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