Fintech firm One97 Communications Ltd (OCL) on Monday said it has not received government approval for a downstream investment in payment aggregator subsidiary Paytm Payment Services Ltd.
In November 2020, PPSL applied for a licence with the Reserve Bank of India (RBI) to operate as a payment aggregator under the guidelines on Regulation of Payment Aggregators and Payment Gateways.
However, in November 2022, RBI rejected PPSL's application and asked the company to resubmit it, so as to comply with Press Note 3 under FDI rules.
"As part of the Application, PPSL had also applied to the Government of India for approval of downstream investment made by the Company in PPSL, which is currently awaited. We will update the stock exchanges as and when approval is received. Meanwhile, PPSL continues to serve its existing online merchant partners," Paytm said in a regulatory filing.
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The banking regulator asked the firm in November 2022 to re-submit applications within 120 days after it gets government approval on investment made by OCL into PPSL as per FDI guidelines.
The regulator asked PPSL to continue operations with the condition that no new merchants should be onboard.
After the completion of 120 days, RBI again granted PPSL an extension but without removing the bar on new merchant onboarding.
Under Press Note 3, the government had made its prior approval mandatory for foreign investments in any sector from countries that share a land border with India to curb opportunistic takeovers of domestic firms following the COVID-19 pandemic.
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Countries which share land borders with India are China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar and Afghanistan.
Paytm has received significant investments from Chinese companies.
"We would also like to highlight that there have been changes in the ownership structure of the Company, with the Paytm founder, Mr Vijay Shekhar Sharma, now being the sole Significant Beneficial Owner. This was informed to the stock exchanges on September 03, 2023," the filing said.
Paytm in August 2023 announced that Sharma would acquire a 10.3 stake in Antfin through his overseas entity Resilient Asset Management BV which will make him the largest stakeholder in the company with a 19.42 per cent stake.
In return, Resilient issued a debt instrument --optionally convertible debentures, to Antfin thereby maintaining the economic interest of Alibaba group firm.
With this transaction, Antfin's direct stake in Paytm was reduced to 13.5 per cent. Antfin further sold 3.6 per cent in Paytm to bring its shareholding to less than 10 per cent and at present holds 9.89 per cent of the fintech firm.
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