Paytm shares jumped 10% on Friday, hitting an upper circuit, after the government approved its foreign direct investment (FDI) proposal for the payment aggregator business.
The financial services secretary announced that Paytm can now approach the Reserve Bank of India (RBI) to seek a payment aggregator license, which the central bank will further evaluate. The stock was last trading at ₹509.05, up 9.99% on the NSE.
Initially, the government was hesitant to grant the license due to concerns over Chinese shareholder Ant Group’s stake in Paytm. However, Ant Group has reduced its holding in recent months, likely easing the government’s concerns.
The FDI approval allows Paytm to strengthen its payment processing services for online transactions. Previously, in 2022, the RBI had withheld Paytm Payments Services’ application to become a payment aggregator, asking the company to get government permission for past investments from Ant Group.
Vijay Shekhar Sharma, Paytm’s billionaire founder, acquired a 10.3% stake from Ant last year in a cashless deal, making him the largest shareholder in One97 Communications, Paytm’s parent company, with over 24% equity. Analysts believe this deal boosted the government’s confidence in granting Paytm the FDI approval.
Paytm’s application to qualify as a payments aggregator is still pending before the RBI. The central bank had also barred Paytm from onboarding new online merchants in 2022. Approval for such applications depends on meeting regulatory requirements and compliance norms.
Paytm has faced pressure recently after the RBI ordered Paytm Payments Bank, another unit of Sharma’s fintech empire, to stop accepting deposits into its accounts or digital wallet.
Disclaimer: The views and investment tips expressed by investment experts on Sharepriceindia.com are their own and not those of the website or its management. Sharepriceindia.com advises users to check with certified experts before taking any investment decisions.
